Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Kraft Foods Group Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
An analysis of the cash flow position indicates a consistent decline in both operating cash generation and free cash flow to the firm (FCFF) over the three-year period ending December 27, 2014.
- Operating Cash Flow Performance
- Net cash provided by operating activities experienced a significant contraction between 2012 and 2013, decreasing from 3,035 million US$ to 2,043 million US$. This represented a decline of approximately 32.7%. The downward trend stabilized in 2014, with a marginal further decrease to 2,020 million US$.
- Free Cash Flow to the Firm (FCFF) Trends
- FCFF followed a trajectory similar to operating cash flows, falling from 2,715 million US$ in 2012 to 1,936 million US$ in 2013, and further decreasing to 1,848 million US$ in 2014. Over the full period, FCFF decreased by approximately 31.9%, reflecting a reduction in the cash available to all capital providers.
- Cash Conversion and Capital Expenditure Analysis
- The narrow margin between net cash provided by operating activities and FCFF suggests a relatively low level of capital expenditure relative to total operating cash. However, while operating cash flows remained nearly flat between 2013 and 2014, the FCFF continued to decline, indicating an increase in capital outflows during the final year of the period.
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Interest Paid, Net of Tax
Kraft Foods Group Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
2 2014 Calculation
Cash paid, interest, tax = Cash paid, interest × EITR
= 487 × 25.80% = 126
A significant upward trajectory is observed in the net cash outflows for interest payments over the three-year period ending December 27, 2014.
- Net Interest Expenditure Trend
- Cash paid for interest, net of tax, increased from 102 million US dollars in 2012 to 319 million US dollars in 2013, marking a substantial year-over-year rise. This growth persisted into 2014, with expenditures reaching 361 million US dollars. The overall trend indicates a marked increase in the net cash burden associated with debt servicing.
- Effective Income Tax Rate Influence
- The effective income tax rate remained stable between 2012 and 2013, recorded at 33.10% and 33.60% respectively. A significant reduction to 25.80% is observed in 2014. Since interest is paid net of tax, the reduction in the effective tax rate diminishes the value of the tax shield, meaning a larger portion of the gross interest expense is borne as a net cash outflow.
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Enterprise Value to FCFF Ratio, Current
Kraft Foods Group Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 59,575) |
| Free cash flow to the firm (FCFF) | 1,848) |
| Valuation Ratio | |
| EV/FCFF | 32.23 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| lululemon athletica inc. | 11.46 |
| Nike Inc. | 23.62 |
Based on: 10-K (reporting date: 2014-12-27).
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
Kraft Foods Group Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Enterprise value (EV)1 | 46,470) | 41,145) | 39,370) | |
| Free cash flow to the firm (FCFF)2 | 1,848) | 1,936) | 2,715) | |
| Valuation Ratio | ||||
| EV/FCFF3 | 25.14 | 21.25 | 14.50 | |
| Benchmarks | ||||
| EV/FCFF, Competitors4 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
3 2014 Calculation
EV/FCFF = EV ÷ FCFF
= 46,470 ÷ 1,848 = 25.14
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2012 to 2014 reveals a significant divergence between the company's enterprise value and its ability to generate free cash flow to the firm. This trend has resulted in a substantial expansion of the EV/FCFF valuation multiple over the three-year period.
- Enterprise Value (EV)
- A consistent upward trajectory is observed in the enterprise value, which rose from US$ 39,370 million in 2012 to US$ 46,470 million in 2014. This steady increase indicates an growth in the overall market valuation of the firm's operations.
- Free Cash Flow to the Firm (FCFF)
- In contrast to the valuation growth, the free cash flow to the firm exhibited a downward trend. FCFF decreased from US$ 2,715 million in 2012 to US$ 1,936 million in 2013, and further declined to US$ 1,848 million by 2014. This represents a contraction in the actual cash available to all capital providers.
- EV/FCFF Ratio
- The EV/FCFF ratio increased sharply from 14.50 in 2012 to 25.14 in 2014. Because the ratio is driven by a rising numerator (EV) and a falling denominator (FCFF), the result is an accelerated increase in the multiple. This pattern suggests that the company's valuation expanded despite a weakening in its cash flow generation capabilities, indicating a higher premium being paid per unit of free cash flow.
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