Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Dollar Tree Inc., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
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The financial performance from 2017 through 2022 is characterized by significant volatility in both operational cash generation and free cash flow to the firm (FCFF). A notable peak in cash generation occurred in January 2021, followed by a sharp contraction in the subsequent fiscal year.
- Net Cash Provided by Operating Activities
- Operating cash flows exhibited a general upward trajectory between 2018 and 2021, increasing from US$ 1,510,200 thousand to a peak of US$ 2,716,300 thousand. However, this growth reversed abruptly by January 2022, where cash provided by operating activities fell to US$ 1,431,500 thousand, marking the lowest level observed within the analyzed period.
- Free Cash Flow to the Firm (FCFF)
- FCFF demonstrated greater instability than operating cash flows. After an initial decline in 2018, the metric fluctuated before reaching a maximum of US$ 1,937,853 thousand in 2021. By January 2022, FCFF experienced a severe reduction to US$ 554,541 thousand, representing a decline of approximately 71% from its 2021 peak.
- Operational Conversion Efficiency
- The relationship between operating cash flows and FCFF indicates varying levels of capital intensity. In 2020, FCFF declined to US$ 964,968 thousand despite an increase in operating cash flow, suggesting an increase in capital expenditures or related outflows. The most significant divergence occurred in 2022, where FCFF dropped to approximately 38.7% of operating cash flow, indicating a substantial increase in the capital requirements relative to the cash generated from operations.
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Interest Paid, Net of Tax
Dollar Tree Inc., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2 2022 Calculation
Cash paid for interest, net of amounts capitalized, tax = Cash paid for interest, net of amounts capitalized × EITR
= 176,100 × 18.60% = 32,755
3 2022 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 1,100 × 18.60% = 205
The financial profile concerning interest expenditures and tax obligations exhibits significant volatility and a general downward trajectory in the effective tax rate over the six-year period ending January 29, 2022.
- Effective Income Tax Rate (EITR) Trends
- A substantial reduction in the effective income tax rate is observed, declining from 32.60% in 2017 to 18.60% by 2022. A significant structural decrease occurred between February 3, 2018, and February 2, 2019, when the rate fell from 32.40% to 21.00%. Following this shift, the rate remained relatively stable in the low-to-mid twenties before reaching its lowest point in the final analyzed year.
- Cash Interest Outlays (Net of Tax)
- Cash paid for interest, net of capitalized amounts and tax, demonstrated a non-linear pattern characterized by a sharp peak and subsequent contraction. Expenditures increased to a maximum of US$ 302.9 million in 2019, followed by a steep decline to US$ 128.2 million in 2020 and a further decrease to US$ 117.9 million in 2021. A moderate increase is noted in 2022, with payments rising to US$ 143.3 million.
- Capitalized Interest Analysis
- Capitalized interest, net of tax, remains a marginal component of the overall interest expense profile. These amounts fluctuated between a high of US$ 3.3 million in 2019 and a low of US$ 0.9 million in 2022, indicating limited capitalization of interest costs relative to the primary cash interest outlays.
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Enterprise Value to FCFF Ratio, Current
Dollar Tree Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 36,133,978) |
| Free cash flow to the firm (FCFF) | 554,541) |
| Valuation Ratio | |
| EV/FCFF | 65.16 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Costco Wholesale Corp. | 48.47 |
| Target Corp. | 25.69 |
| Walmart Inc. | 61.86 |
| EV/FCFF, Sector | |
| Consumer Staples Distribution & Retail | 73.09 |
| EV/FCFF, Industry | |
| Consumer Staples | 47.30 |
Based on: 10-K (reporting date: 2022-01-29).
1 Click competitor name to see calculations.
If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.
Enterprise Value to FCFF Ratio, Historical
Dollar Tree Inc., historical EV/FCFF calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Enterprise value (EV)1 | 36,437,266) | 27,261,718) | 21,223,520) | 28,668,857) | 27,305,122) | 23,540,007) | |
| Free cash flow to the firm (FCFF)2 | 554,541) | 1,937,853) | 964,968) | 1,255,104) | 1,073,229) | 1,332,031) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | 65.71 | 14.07 | 21.99 | 22.84 | 25.44 | 17.67 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| Costco Wholesale Corp. | 58.09 | 35.64 | — | — | — | — | |
| Target Corp. | 21.05 | 11.38 | — | — | — | — | |
| Walmart Inc. | 33.26 | 14.86 | — | — | — | — | |
| EV/FCFF, Sector | |||||||
| Consumer Staples Distribution & Retail | 34.48 | 16.94 | — | — | — | — | |
| EV/FCFF, Industry | |||||||
| Consumer Staples | 30.06 | 20.91 | — | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 36,437,266 ÷ 554,541 = 65.71
4 Click competitor name to see calculations.
The financial trajectory from 2017 to 2022 is characterized by a growing divergence between the company's enterprise value and its ability to generate free cash flow to the firm. While the overall valuation has trended upward over the six-year period, the cash flow generation has exhibited significant volatility, leading to a substantial expansion of the valuation multiple in the final year of the analysis.
- Enterprise Value (EV) Trends
- A general upward trend in enterprise value is observed, rising from approximately 23.5 billion USD in 2017 to a peak of 36.4 billion USD in 2022. A notable exception occurred in 2020, where the value contracted to 21.2 billion USD before rebounding strongly in the subsequent two years.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated instability throughout the period. Cash flow remained relatively consistent between 2017 and 2020, fluctuating between 965 million USD and 1.33 billion USD. A significant peak was reached in 2021 at 1.94 billion USD, which was immediately followed by a sharp decline to the period low of 554.5 million USD in 2022.
- EV/FCFF Ratio Interpretation
- Between 2017 and 2021, the EV/FCFF ratio remained within a range of 14.07 to 25.44, suggesting a relatively stable valuation relative to cash flow generation. However, the ratio experienced a dramatic spike to 65.71 in 2022. This extreme increase was the result of a simultaneous peak in enterprise value and a sharp contraction in free cash flow, indicating a significant deviation from historical valuation norms.
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