Express Scripts Holding Co. (NASDAQ:ESRX)

The analysis of the cash flow indicators over the five-year period reveals distinct trends indicative of the company's operational efficiency and cash generation capacity.

Net Cash Flows Provided by Operating Activities

This metric exhibits a generally positive trend, starting at $4,768,900 thousand in 2013. There was a slight decline in 2014 to $4,549,000 thousand, followed by a rebound and gradual increment each subsequent year, reaching $5,351,300 thousand by 2017. This reflects an overall strengthening in the company's ability to generate cash from its core business operations, with a notable recovery and growth after the dip in 2014.

Free Cash Flow to the Firm (FCFF)

FCFF follows a pattern similar to operating cash flows, beginning at $4,694,492 thousand in 2013 and decreasing marginally to $4,463,922 thousand in 2014. From 2015 onward, it increased steadily, peaking at $5,631,256 thousand in 2017. This upward trajectory in free cash flow indicates improved capacity to fund business activities, invest in growth, reduce debt, and return capital to shareholders.

General Observations

The consistent increase in both operating cash flows and free cash flow after 2014 suggests enhanced operational performance and financial health. The minor dip in 2014 could indicate transitional challenges or increased expenditures that year but was effectively countered in the following years. The widening gap between these two metrics over time, although slight, may suggest optimal management of capital expenditures and working capital, contributing to a stronger free cash flow position.

Effective Income Tax Rate (EITR)

The effective income tax rate showed a general decreasing trend from 2013 to 2017. Initially, it decreased from 36.4% in 2013 to 33.6% in 2014, followed by a slight increase to 35.3% in 2015. However, after 2015, the rate experienced a more pronounced decline, reaching 22.6% in 2016 and further dropping significantly to 8.1% in 2017. This pattern suggests a substantial reduction in the tax burden over the five-year period, particularly in the last two years.

Cash Paid During the Year for Interest, Net of Tax

The cash outflow for interest payments, net of tax, exhibited an overall upward trend from 2013 through 2017. The payments were relatively stable between 2013 (approximately $348.6 million) and 2015 (around $335.2 million), with minor fluctuations. Starting in 2016, the interest payment increased noticeably to approximately $394.7 million and then surged significantly in 2017 to about $547.4 million. This escalation indicates rising financing costs or increased debt levels in recent years.

Enterprise Value (EV)

The enterprise value exhibited fluctuations over the five-year period. Initially, it increased slightly from approximately 71.81 billion USD in 2013 to 74.78 billion USD in 2014. Thereafter, a notable decline occurred, reaching 58.28 billion USD in 2015 and decreasing further to 54.68 billion USD in 2016. In 2017, a modest recovery was observed with the EV rising to approximately 58.09 billion USD.

Free Cash Flow to the Firm (FCFF)

Free cash flow demonstrated an overall upward trend across the same period. Starting at roughly 4.69 billion USD in 2013, there was a slight decrease in 2014 to about 4.46 billion USD. Subsequently, FCFF consistently increased each year, reaching nearly 5.63 billion USD by the end of 2017, suggesting improved operational cash generation capacity.

EV/FCFF Ratio

The EV to FCFF ratio showed a declining trend throughout the timeframe analyzed. Beginning at 15.3 in 2013, it rose slightly to 16.75 in 2014, coinciding with the increase in enterprise value and the dip in FCFF. From 2015 onward, this ratio steadily decreased to 11.92, then 10.97, and finally 10.32 in 2017. This downward shift indicates that the enterprise value was becoming more favorably valued relative to its free cash flow generation, potentially reflecting an improved valuation or stronger cash flow generation relative to the firm's size.