Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Fiserv Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
A consistent upward trajectory in cash generation is observed between 2017 and 2020, followed by a slight moderation in 2021. The growth is most pronounced during the 2019 and 2020 fiscal years, where both operating cash flows and free cash flow to the firm experienced substantial expansions.
- Net Cash Provided by Operating Activities
- Operating cash flows exhibited steady growth from 1,483 million US$ in 2017 to a peak of 4,147 million US$ in 2020. The most significant acceleration occurred between 2018 and 2019, with a value increase of approximately 79.5%. A marginal decline of 2.7% was noted in 2021, bringing the total to 4,034 million US$, indicating a stabilization of operating cash generation at a significantly higher plateau than the 2017-2018 period.
- Free Cash Flow to the Firm (FCFF)
- FCFF followed a pattern closely aligned with operating activities, rising from 1,305 million US$ in 2017 to a peak of 3,808 million US$ in 2020. Similar to the operating cash flow, a sharp increase is evident starting in 2019, where FCFF grew by 75.3%. However, the contraction in 2021 was more pronounced than that of operating activities, with FCFF decreasing by 11.2% to 3,381 million US$.
- Capital Expenditure Trends
- The variance between net cash provided by operating activities and FCFF suggests fluctuations in capital allocations. While the gap remained relatively stable between 2017 and 2018, it widened significantly in 2019 and reached its highest point in 2021. In 2021, the difference between operating cash flow and FCFF expanded to 653 million US$, the largest disparity in the analyzed period, which indicates an increase in capital expenditures or investments despite the slight decline in overall cash generation.
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Interest Paid, Net of Tax
Fiserv Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2 2021 Calculation
Interest paid, tax = Interest paid × EITR
= 648 × 21.80% = 141
An analysis of net interest expenditures between 2017 and 2021 reveals a period of substantial growth followed by a marginal correction. The net cost of interest rose consistently for four consecutive years, peaking in 2020 before experiencing a slight decline in 2021.
- Net Interest Cost Trajectory
- Interest paid, net of tax, exhibited a sharp upward trend from 2017 to 2020. Starting at 109 million USD in 2017, the amount increased to 127 million USD in 2018 and accelerated to 238 million USD in 2019. The most significant escalation occurred in 2020, where expenses reached 561 million USD, representing a more than five-fold increase relative to the 2017 baseline. In 2021, the amount moderated to 507 million USD.
- Effective Income Tax Rate Influence
- The Effective Income Tax Rate (EITR) demonstrated a consistent downward trend from 2017 to 2020, falling from 31.90% to 16.70%. This reduction in the tax rate decreases the value of the tax shield provided by interest expenses, which contributes to a higher net cost of interest. A reversal occurred in 2021, when the EITR rose to 21.80%, coinciding with the first observed decrease in net interest payments.
- Aggregate Financial Pattern
- The combined movement of increasing interest payments and a declining tax rate from 2017 to 2020 intensified the net cash outflow associated with debt servicing. The stabilization observed in 2021 suggests a pivot in either the total debt burden or an improvement in the tax-shield efficiency due to the rising effective tax rate.
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Enterprise Value to FCFF Ratio, Current
Fiserv Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 88,825) |
| Free cash flow to the firm (FCFF) | 3,381) |
| Valuation Ratio | |
| EV/FCFF | 26.27 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Accenture PLC | 11.34 |
| Adobe Inc. | 9.30 |
| AppLovin Corp. | 23.00 |
| Cadence Design Systems Inc. | 57.48 |
| Datadog Inc. | 104.71 |
| International Business Machines Corp. | 19.67 |
| Intuit Inc. | 8.60 |
| Microsoft Corp. | 56.28 |
| Oracle Corp. | — |
| Palantir Technologies Inc. | 214.04 |
| Palo Alto Networks Inc. | 78.49 |
| Salesforce Inc. | 13.70 |
| ServiceNow Inc. | 30.25 |
| Synopsys Inc. | 61.90 |
| Workday Inc. | 14.92 |
| EV/FCFF, Sector | |
| Software & Services | 54.69 |
| EV/FCFF, Industry | |
| Information Technology | 80.03 |
Based on: 10-K (reporting date: 2021-12-31).
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
Fiserv Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 83,446) | 97,754) | 96,331) | 38,731) | 33,938) | |
| Free cash flow to the firm (FCFF)2 | 3,381) | 3,808) | 2,312) | 1,319) | 1,305) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 24.68 | 25.67 | 41.67 | 29.37 | 26.01 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Accenture PLC | 24.76 | 17.90 | — | — | — | |
| Adobe Inc. | 33.61 | 40.43 | — | — | — | |
| AppLovin Corp. | — | — | — | — | — | |
| Cadence Design Systems Inc. | 35.05 | — | — | — | — | |
| Datadog Inc. | 198.40 | — | — | — | — | |
| International Business Machines Corp. | 13.10 | — | — | — | — | |
| Intuit Inc. | 48.64 | — | — | — | — | |
| Microsoft Corp. | 36.19 | — | — | — | — | |
| Oracle Corp. | 16.36 | — | — | — | — | |
| Palantir Technologies Inc. | 66.45 | — | — | — | — | |
| Palo Alto Networks Inc. | 32.74 | — | — | — | — | |
| Salesforce Inc. | 44.91 | — | — | — | — | |
| ServiceNow Inc. | 60.12 | — | — | — | — | |
| Synopsys Inc. | 38.59 | 42.88 | — | — | — | |
| Workday Inc. | 57.52 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Software & Services | 32.08 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Information Technology | 27.37 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
3 2021 Calculation
EV/FCFF = EV ÷ FCFF
= 83,446 ÷ 3,381 = 24.68
4 Click competitor name to see calculations.
Between 2017 and 2021, the company's valuation and cash flow generation exhibited significant volatility, characterized by a sharp expansion in enterprise value followed by a compression of the valuation multiple as free cash flow generation accelerated.
- Enterprise Value (EV) Trends
- A substantial increase in enterprise value is observed between 2018 and 2019, where the value rose from 38,731 million USD to 96,331 million USD. This elevated valuation was maintained through 2020, peaking at 97,754 million USD, before experiencing a moderate decline to 83,446 million USD by the end of 2021.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated a consistent upward trajectory from 2017 through 2020. After remaining relatively stagnant between 2017 and 2018, FCFF grew significantly to 2,312 million USD in 2019 and reached a five-year peak of 3,808 million USD in 2020. A slight contraction occurred in 2021, with FCFF decreasing to 3,381 million USD.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio peaked in 2019 at 41.67, reflecting a period where the expansion of enterprise value substantially outpaced the growth of free cash flow. Following this peak, a sharp correction occurred in 2020 and 2021, with the ratio falling to 25.67 and 24.68, respectively. This downward trend indicates that the rapid increase in FCFF during 2020 effectively lowered the valuation multiple, returning it to levels comparable to those seen in 2017.
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