Microsoft Excel LibreOffice Calc

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate


Free Cash Flow to The Firm (FCFF)

Facebook Inc., FCFF calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income 22,112  15,934  10,217  3,688  2,940 
Net noncash charges 8,689  6,395  5,133  4,127  2,779 
Changes in assets and liabilities (1,527) 1,887  758  784  (262)
Net cash provided by operating activities 29,274  24,216  16,108  8,599  5,457 
Cash paid during the period for interest, net of tax1 – 
Purchases of property and equipment, net (13,915) (6,733) (4,491) (2,523) (1,831)
Free cash flow to the firm (FCFF) 15,360  17,483  11,626  6,082  3,634 

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Facebook Inc.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Facebook Inc.’s FCFF increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Interest Paid, Net of Tax

Facebook Inc., interest paid, net of tax calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Effective Income Tax Rate (EITR)
EITR1 12.80% 22.60% 18.40% 40.40% 40.10%
Interest Paid, Net of Tax
Cash paid during the period for interest, before tax –  11  10  14 
Less: Cash paid during the period for interest, tax2 –  – 
Cash paid during the period for interest, net of tax – 

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

2018 Calculations

2 Cash paid during the period for interest, tax = Cash paid during the period for interest × EITR
= 1 × 12.80% = 0


Enterprise Value to FCFF Ratio, Current

Facebook Inc., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 415,639 
Free cash flow to the firm (FCFF) 15,360 
Ratio
EV/FCFF 27.06
Benchmarks
EV/FCFF, Competitors
Adobe Inc. 32.99
Alphabet Inc. 28.50
International Business Machines Corp. 11.38
Microsoft Corp. 23.62
Oracle Corp. 12.72
salesforce.com inc. 53.62
EV/FCFF, Sector
Software & Computer Services 23.14
EV/FCFF, Industry
Technology 20.16

Based on: 10-K (filing date: 2019-01-31).

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.


Enterprise Value to FCFF Ratio, Historical

Facebook Inc., historical EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 434,618  519,216  349,081  292,238  207,357 
Free cash flow to the firm (FCFF)2 15,360  17,483  11,626  6,082  3,634 
Ratio
EV/FCFF3 28.30 29.70 30.03 48.05 57.05
Benchmarks
EV/FCFF, Competitors
Adobe Inc. 31.36 33.45 25.29 30.64 28.06
Alphabet Inc. 29.97 27.15 18.05 24.85 26.71
International Business Machines Corp. 12.73 14.18 11.32 14.03
Microsoft Corp. 23.29 15.52 14.60 12.94 10.67
Oracle Corp. 11.92 15.07 11.24 12.09 10.98
salesforce.com inc. 40.62 27.87 36.70 53.67 409.10
EV/FCFF, Sector
Software & Computer Services 20.88 17.42 18.56 17.01
EV/FCFF, Industry
Technology 18.94 14.94 13.81 14.37

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

2018 Calculations

3 EV/FCFF = EV ÷ FCFF
= 434,618 ÷ 15,360 = 28.30

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Facebook Inc.’s EV/FCFF ratio declined from 2016 to 2017 and from 2017 to 2018.