Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Express Scripts Holding Co., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
An analysis of the cash flow performance between 2013 and 2017 reveals a consistent upward trajectory in both operating cash flows and free cash flow to the firm (FCFF), despite a marginal contraction in 2014.
- Operating Cash Flow Trends
- Net cash flows provided by operating activities exhibited an overall growth pattern, increasing from 4,768,900 thousand US$ in 2013 to 5,351,300 thousand US$ in 2017. A brief decline occurred in 2014, where cash flows dropped to 4,549,000 thousand US$, followed by a steady recovery and acceleration in growth through the end of the period.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF closely mirrored the trend of operating cash flows, starting at 4,694,492 thousand US$ in 2013 and reaching 5,631,256 thousand US$ by 2017. The most significant expansion was observed between 2016 and 2017, where FCFF increased by approximately 647,593 thousand US$, representing a strong conclusion to the five-year period.
- FCFF to Operating Cash Flow Correlation
- A notable shift in the relationship between operating cash flows and FCFF occurred in 2015. During 2013 and 2014, FCFF remained slightly below operating cash flows. However, starting in 2015, FCFF exceeded operating cash flows, with the gap widening significantly by 2017. This divergence suggests that the combined impact of interest expenses and capital expenditures became increasingly favorable, enhancing the total cash available to all capital providers relative to the cash generated by core operations.
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Interest Paid, Net of Tax
Express Scripts Holding Co., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
2 2017 Calculation
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 595,600 × 8.10% = 48,244
Between 2013 and 2017, a divergent trend is observed between the effective income tax rate and the net cash outflows for interest payments.
- Effective Income Tax Rate (EITR) Analysis
- The effective income tax rate experienced a significant overall decline during the period. From 2013 to 2015, the rate remained relatively stable, fluctuating between 33.60% and 36.40%. A sharp contraction began in 2016, where the rate dropped to 22.60%, followed by a further decrease to 8.10% by December 31, 2017.
- Net Interest Expenditure Trends
- Cash paid for interest, net of tax, remained consistent for the first three years, with values ranging from $335.2 million to $351.5 million. Starting in 2016, there was a marked increase in these outflows, rising to $394.7 million, and culminating in a substantial increase to $547.4 million in 2017.
- Analysis of After-Tax Financing Costs
- The data indicates an inverse relationship between the tax rate and the net cost of interest. As the effective income tax rate decreased, the tax shield provided by interest deductions diminished, thereby increasing the net cash impact of interest payments. The peak in net interest paid in 2017 corresponds directly with the lowest recorded EITR, suggesting that the increase in net outflows was driven by both a potentially higher gross interest burden and a reduced tax benefit.
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Enterprise Value to FCFF Ratio, Current
Express Scripts Holding Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 68,388,005) |
| Free cash flow to the firm (FCFF) | 5,631,256) |
| Valuation Ratio | |
| EV/FCFF | 12.14 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 23.75 |
| Elevance Health Inc. | 19.99 |
| Intuitive Surgical Inc. | 60.12 |
| Medtronic PLC | 23.79 |
| UnitedHealth Group Inc. | 21.70 |
Based on: 10-K (reporting date: 2017-12-31).
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
Express Scripts Holding Co., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 58,090,748) | 54,675,184) | 58,275,458) | 74,781,795) | 71,810,588) | |
| Free cash flow to the firm (FCFF)2 | 5,631,256) | 4,983,663) | 4,887,611) | 4,463,922) | 4,694,492) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 10.32 | 10.97 | 11.92 | 16.75 | 15.30 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
3 2017 Calculation
EV/FCFF = EV ÷ FCFF
= 58,090,748 ÷ 5,631,256 = 10.32
4 Click competitor name to see calculations.
The financial trajectory between 2013 and 2017 is characterized by a divergence between the company's enterprise value and its cash flow generation, leading to a consistent compression of the valuation multiple.
- Enterprise Value (EV) Trends
- The enterprise value exhibited a non-linear trend over the five-year period. After an initial increase from 71.8 billion USD in 2013 to a peak of 74.8 billion USD in 2014, a substantial contraction occurred, with the value declining to 54.7 billion USD by 2016. A moderate recovery was observed in 2017, as the value rose to 58.1 billion USD.
- Free Cash Flow to the Firm (FCFF) Performance
- Cash flow generation demonstrated stability and growth. Following a slight decrease to 4.46 billion USD in 2014, FCFF entered a period of sustained annual growth, reaching 5.63 billion USD by 2017. This upward trend indicates an improved capacity to generate cash available for all capital providers over the analyzed period.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio underwent a significant downward adjustment after 2014. The ratio rose from 15.30 in 2013 to a peak of 16.75 in 2014, before declining consistently to 10.32 by 2017. This trend is the result of the combined effect of a lower enterprise value and increasing free cash flow, indicating that the firm's market valuation became more conservative relative to its underlying cash flow productivity.
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