Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Fortinet Inc., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
The financial data reveals a clear and consistent upward trend in both net cash provided by operating activities and free cash flow to the firm (FCFF) over the five-year period ending in 2022.
- Net Cash Provided by Operating Activities
-
Starting at $638.9 million in 2018, net cash from operating activities shows strong growth annually. The amount increases steadily each year, rising to $808.0 million in 2019, then jumping to $1.0837 billion in 2020, further increasing to $1.4997 billion in 2021, and reaching $1.7306 billion by 2022. This upward trajectory indicates improved operational efficiency and an expanding capacity to generate cash internally.
- Free Cash Flow to the Firm (FCFF)
-
The FCFF similarly exhibits a consistent increase throughout the years. It starts at $585.9 million in 2018, grows to $715.8 million in 2019, rises sharply to $957.8 million in 2020, and continues to climb to $1.212 billion in 2021. By 2022, FCFF reaches approximately $1.465 billion, reflecting a growing surplus of cash after accounting for capital expenditures, which can be used for debt reduction, dividends, or reinvestment.
Both metrics demonstrate a positive financial momentum and improved cash generation ability year-over-year. The faster growth rate seen in operating cash flow compared to FCFF suggests either increasing capital expenditures or investments, which is typical for a company in a growth phase reinvesting to sustain long-term expansion. Overall, the data shows a robust and healthy cash flow profile that supports operational resilience and financial flexibility.
Interest Paid, Net of Tax
Fortinet Inc., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
2 2022 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= 16,000 × 3.22% = 515
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibits a consistent downward trend from 2018 through 2021, decreasing significantly from 21% in 2018 to 2.24% in 2021. This decline indicates improved tax efficiency or potentially the utilization of tax credits or other tax planning strategies over these years. In 2022, there is a slight increase in the rate to 3.22%, which suggests a minor rebound but still maintaining a relatively low tax rate compared to the initial figures.
- Cash Paid for Interest, Net of Tax
- Data for cash paid for interest, net of tax, is not available for the years 2018 to 2020. Beginning in 2021, the company reported $8,212 thousand, which nearly doubles to $15,485 thousand in 2022. This significant increase may reflect higher interest expenses due to increased debt levels or changes in debt cost, indicating potentially greater financial leverage or changes in financing structure during this period.
Enterprise Value to FCFF Ratio, Current
Fortinet Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 50,665,163) |
| Free cash flow to the firm (FCFF) | 1,464,885) |
| Valuation Ratio | |
| EV/FCFF | 34.59 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Accenture PLC | 12.60 |
| Adobe Inc. | 10.96 |
| AppLovin Corp. | 73.06 |
| Cadence Design Systems Inc. | 63.63 |
| CrowdStrike Holdings Inc. | 84.32 |
| Datadog Inc. | 44.92 |
| International Business Machines Corp. | 22.41 |
| Intuit Inc. | 19.41 |
| Microsoft Corp. | 40.01 |
| Oracle Corp. | 185.45 |
| Palantir Technologies Inc. | 267.02 |
| Palo Alto Networks Inc. | 30.24 |
| Salesforce Inc. | 13.71 |
| ServiceNow Inc. | 22.54 |
| Synopsys Inc. | 52.73 |
| Workday Inc. | 16.11 |
| EV/FCFF, Sector | |
| Software & Services | 43.40 |
| EV/FCFF, Industry | |
| Information Technology | 57.78 |
Based on: 10-K (reporting date: 2022-12-31).
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
Fortinet Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 44,929,542) | 50,710,379) | 26,223,379) | 16,264,089) | 13,349,100) | |
| Free cash flow to the firm (FCFF)2 | 1,464,885) | 1,212,012) | 957,800) | 715,800) | 585,900) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 30.67 | 41.84 | 27.38 | 22.72 | 22.78 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Accenture PLC | 16.99 | 24.76 | 17.90 | — | — | |
| Adobe Inc. | 20.82 | 33.61 | 40.43 | — | — | |
| AppLovin Corp. | 13.94 | 43.78 | — | — | — | |
| Cadence Design Systems Inc. | 44.54 | 35.05 | 44.13 | — | — | |
| CrowdStrike Holdings Inc. | 96.35 | 141.44 | 807.14 | — | — | |
| Datadog Inc. | 66.00 | 198.40 | 346.45 | — | — | |
| International Business Machines Corp. | 16.47 | 13.10 | 9.35 | — | — | |
| Intuit Inc. | 32.85 | 48.64 | 37.90 | — | — | |
| Microsoft Corp. | 30.26 | 36.19 | 31.49 | — | — | |
| Oracle Corp. | 31.60 | 16.36 | 14.99 | — | — | |
| Palantir Technologies Inc. | 82.97 | 66.45 | — | — | — | |
| Palo Alto Networks Inc. | 29.30 | 32.74 | 26.50 | — | — | |
| Salesforce Inc. | 35.97 | 44.91 | 39.63 | — | — | |
| ServiceNow Inc. | 40.87 | 60.12 | — | — | — | |
| Synopsys Inc. | 30.82 | 38.59 | 42.88 | — | — | |
| Workday Inc. | 45.74 | 57.52 | 72.44 | — | — | |
| EV/FCFF, Sector | ||||||
| Software & Services | 28.82 | 32.02 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Information Technology | 26.34 | 27.38 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 44,929,542 ÷ 1,464,885 = 30.67
4 Click competitor name to see calculations.
- Enterprise value (EV)
- The enterprise value exhibited a generally strong upward trend from 2018 to 2021, increasing from approximately $13.3 billion to over $50.7 billion. This represents a near fourfold rise in the span of three years. However, in 2022, a decline is observed, with the enterprise value decreasing to around $44.9 billion, indicating a contraction of roughly 11.5% from the previous year.
- Free cash flow to the firm (FCFF)
- Free cash flow to the firm consistently grew each year over the five-year period. Starting at about $586 million in 2018, it increased steadily to approximately $1.46 billion by 2022. This continuous growth highlights enhanced operational cash generation capabilities year over year without visible fluctuations or declines.
- EV/FCFF Ratio
- The ratio of enterprise value to free cash flow to the firm started at 22.78 in 2018 and remained relatively stable through 2019 at 22.72. In 2020, it rose to 27.38, followed by a significant jump to 41.84 in 2021, reflecting an increase in valuation relative to cash flow. In 2022, this ratio decreased to 30.67, signaling a moderation in valuation multiples but remaining elevated compared to the initial years.
- Overall Analysis
- The data indicate robust growth in cash-generating ability as evidenced by consistent increases in FCFF. The enterprise value expansion until 2021 reflects strong market confidence or growth expectations, though the contraction in 2022 suggests a reassessment or market correction. The EV/FCFF ratio's upward trend through 2021 points to increasing valuation premiums, potentially driven by growth prospects, followed by a partial correction in 2022. These patterns collectively suggest a period of rapid expansion and valuation increase, transitioning into a phase of market recalibration while maintaining solid fundamental cash flow growth.