Microsoft Excel LibreOffice Calc

Facebook Inc. (FB)

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, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income 15,934  10,217  3,688  2,940  1,500 
Net noncash charges 6,395  5,133  4,127  2,779  2,046 
Changes in assets and liabilities 1,887  758  784  (262) 676 
Net cash provided by operating activities 24,216  16,108  8,599  5,457  4,222 
Cash paid during the period for interest, net of tax1 –  9  6  8  21 
Purchases of property and equipment (6,733) (4,491) (2,523) (1,831) (1,362)
Property and equipment acquired under capital leases –  –  –  –  (11)
Free cash flow to the firm (FCFF) 17,483  11,626  6,082  3,634  2,870 

Based on: 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), 10-K (filing date: 2014-01-31).

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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 2015 to 2016 and from 2016 to 2017.

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, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Effective Income Tax Rate (EITR)
EITR1 22.60% 18.40% 40.40% 40.10% 45.50%
Interest Paid, Net of Tax
Cash paid during the period for interest, before tax –  11  10  14  38 
Less: Cash paid during the period for interest, tax2 –  2  4  6  17 
Cash paid during the period for interest, net of tax –  9  6  8  21 

Based on: 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), 10-K (filing date: 2014-01-31).

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2017 Calculations

2 Cash paid during the period for interest, tax = Cash paid during the period for interest × EITR
= 0 × 22.60% = 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) 375,017 
Free cash flow to the firm (FCFF) 17,483 
Ratio
EV/FCFF 21.45
Benchmarks
EV/FCFF, Competitors
Adobe Systems Inc. 42.00
Alphabet Inc. 26.64
International Business Machines Corp. 10.27
Microsoft Corp. 23.64
Oracle Corp. 12.15
salesforce.com inc. 47.26
EV/FCFF, Sector
Software & Computer Services 22.15
EV/FCFF, Industry
Technology 19.50

Based on: 10-K (filing date: 2018-02-01).

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, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 519,216  349,081  292,238  207,357  148,564 
Free cash flow to the firm (FCFF)2 17,483  11,626  6,082  3,634  2,870 
Ratio
EV/FCFF3 29.70 30.03 48.05 57.05 51.77
Benchmarks
EV/FCFF, Competitors
Adobe Systems Inc. 33.45 25.29 30.64 28.06 27.45
Alphabet Inc. 27.18 18.05 24.85 26.71 31.10
International Business Machines Corp. 12.73 14.18 11.32 14.03 15.10
Microsoft Corp. 15.52 14.60 12.94 10.67 8.13
Oracle Corp. 15.07 11.24 12.09 10.98 8.91
salesforce.com inc. 27.87 36.70 53.67 409.10 49.51
EV/FCFF, Sector
Software & Computer Services 20.89 17.42 18.56 17.01 15.85
EV/FCFF, Industry
Technology 18.95 14.94 13.81 14.37 12.59

Based on: 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), 10-K (filing date: 2014-01-31).

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2 See Details »

2017 Calculations

3 EV/FCFF = EV ÷ FCFF
= 519,216 ÷ 17,483 = 29.70

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 2015 to 2016 and from 2016 to 2017.