Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
ON Semiconductor Corp., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
The company experienced a significant expansion in cash generation between 2019 and 2022, followed by a notable contraction in free cash flow in 2023. While operating activities remained robust relative to the start of the period, a divergence emerged between operating cash flows and free cash flow to the firm (FCFF) in the final year of the analyzed period.
- Operating Cash Flow Trajectory
- Net cash provided by operating activities exhibited a consistent upward trend from 2019 to 2022, rising from 694.7 million to a peak of 2.63 billion. This represents a growth of approximately 279% over three years. A decline occurred in 2023, with cash flows retreating to 1.98 billion, though this figure remains significantly higher than pre-2021 levels.
- FCFF Performance and Volatility
- Free cash flow to the firm mirrored the growth of operating activities through 2022, increasing from 241.7 million in 2019 to a peak of 1.70 billion in 2022. However, 2023 saw a sharp reduction in FCFF to 505.5 million, marking a decrease of approximately 70% from the previous year's peak.
- Analysis of Cash Flow Divergence
- A substantial widening of the gap between operating cash flow and FCFF occurred in 2023. Despite operating cash flow decreasing by approximately 25% from 2022 to 2023, FCFF experienced a far more severe contraction. This indicates a significant increase in capital expenditures or other investment-related outflows during 2023, which reduced the amount of cash available to all capital providers relative to the cash generated by core operations.
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Interest Paid, Net of Tax
ON Semiconductor Corp., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
2 2023 Calculation
Cash paid for interest expense, tax = Cash paid for interest expense × EITR
= 73,200 × 13.80% = 10,102
An analysis of cash outflows for interest expense, net of tax, reveals a period of initial escalation followed by a consistent downward trend over the five-year period ending December 31, 2023.
- Cash Paid for Interest Expense Trends
- Net interest cash outflows increased from 75,136 thousand USD in 2019 to a peak of 86,189 thousand USD in 2020. Following this peak, a sustained decline is observed. While the decrease was marginal between 2020 and 2021, a significant contraction occurred in 2022, with payments dropping to 65,044 thousand USD. This downward trajectory continued into 2023, reaching a period low of 63,098 thousand USD.
- Effective Income Tax Rate (EITR) Fluctuations
- The effective income tax rate demonstrated considerable volatility throughout the analyzed timeframe. The rate declined from 22.70% in 2019 to a low of 12.70% in 2021. A subsequent increase to 19.40% was recorded in 2022, before the rate decreased again to 13.80% by December 31, 2023. These fluctuations influence the net cost of interest by modifying the applicable tax shield on interest payments.
- Correlation Between Tax Rates and Net Interest Outflows
- The data indicates that the reduction in net interest paid was not solely dependent on tax rate fluctuations. Specifically, in 2022, the net interest paid decreased significantly despite a rise in the effective income tax rate from 12.70% to 19.40%. This suggests a substantial reduction in gross interest obligations during that period. By 2023, the simultaneous decrease in both the EITR and the net cash paid for interest reflects an optimized cost of debt service from a cash flow perspective.
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Enterprise Value to FCFF Ratio, Current
ON Semiconductor Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 31,363,822) |
| Free cash flow to the firm (FCFF) | 505,498) |
| Valuation Ratio | |
| EV/FCFF | 62.05 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Advanced Micro Devices Inc. | 129.80 |
| Analog Devices Inc. | 39.79 |
| Applied Materials Inc. | 44.57 |
| Broadcom Inc. | 49.99 |
| Intel Corp. | — |
| KLA Corp. | 45.24 |
| Lam Research Corp. | 49.51 |
| Marvell Technology Inc. | 79.78 |
| Micron Technology Inc. | 12.49 |
| NVIDIA Corp. | 45.86 |
| Qualcomm Inc. | 13.48 |
| Texas Instruments Inc. | 85.03 |
| EV/FCFF, Sector | |
| Semiconductors & Semiconductor Equipment | 230.27 |
| EV/FCFF, Industry | |
| Information Technology | 73.12 |
Based on: 10-K (reporting date: 2023-12-31).
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
ON Semiconductor Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 34,051,230) | 35,060,420) | 27,134,222) | 19,667,423) | 11,331,972) | |
| Free cash flow to the firm (FCFF)2 | 505,498) | 1,695,844) | 1,366,294) | 595,389) | 241,736) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 67.36 | 20.67 | 19.86 | 33.03 | 46.88 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 225.41 | 38.82 | 43.41 | — | — | |
| Analog Devices Inc. | 25.61 | 23.12 | 39.16 | 27.12 | — | |
| Applied Materials Inc. | 17.40 | 19.06 | 26.22 | 22.52 | — | |
| Broadcom Inc. | 28.53 | 14.74 | 19.47 | 16.54 | — | |
| Intel Corp. | — | — | 16.94 | — | — | |
| KLA Corp. | 19.99 | 19.05 | 26.29 | — | — | |
| Lam Research Corp. | 17.99 | 24.08 | 24.40 | — | — | |
| Marvell Technology Inc. | 32.51 | 83.26 | 44.07 | — | — | |
| Micron Technology Inc. | — | 16.58 | 28.79 | — | — | |
| NVIDIA Corp. | 142.92 | 78.06 | 69.50 | — | — | |
| Qualcomm Inc. | 11.61 | 18.18 | 17.47 | 30.89 | — | |
| Texas Instruments Inc. | 89.85 | 27.02 | 24.20 | — | — | |
| EV/FCFF, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 59.47 | 35.63 | 26.35 | — | — | |
| EV/FCFF, Industry | ||||||
| Information Technology | 33.99 | 26.47 | 27.37 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 34,051,230 ÷ 505,498 = 67.36
4 Click competitor name to see calculations.
The financial trajectory between 2019 and 2023 is characterized by significant expansion in enterprise valuation and volatile free cash flow generation, resulting in substantial fluctuations in the Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio.
- Enterprise Value Trends
- A consistent upward trajectory in enterprise value was observed from 2019 through 2022, with the value increasing from approximately $11.33 billion to a peak of $35.06 billion. A marginal contraction occurred in 2023, with the value adjusting to $34.05 billion, suggesting a stabilization of the overall market valuation of the entity.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF exhibited strong growth during the initial period, rising from $241.74 million in 2019 to a peak of $1.70 billion in 2022. This growth indicated a period of increasing operational efficiency and cash generation. However, a sharp decline was recorded in 2023, where FCFF dropped to $505.50 million, representing a significant reduction in the firm's ability to generate cash available to all capital providers.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio experienced a period of compression between 2019 and 2021, falling from 46.88 to 19.86, which indicates that cash flow growth outpaced the increase in enterprise value. The ratio remained relatively stable in 2022 at 20.67. In 2023, the ratio expanded sharply to 67.36. This spike is primarily attributable to the substantial decrease in FCFF rather than an increase in enterprise value, signaling a marked deterioration in the valuation relative to current cash flow yields.
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