Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
O’Reilly Automotive Inc., FCFF calculation
US$ in thousands
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).
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Analysis of the cash flow trajectory from 2017 to 2021 reveals a substantial expansion in liquidity generation and capital availability. Both net cash provided by operating activities and free cash flow to the firm (FCFF) exhibit a strong upward trend, characterized by a significant acceleration in growth starting in 2020.
- Operating Cash Flow Performance
- Net cash provided by operating activities grew from 1,403,687 thousand US$ in 2017 to 3,207,310 thousand US$ in 2021. While a marginal contraction occurred in 2019, the subsequent period saw a sharp increase, with the 2020 figure representing a significant spike in cash generation capabilities.
- FCFF Growth and Patterns
- FCFF followed a trajectory closely aligned with operating cash flow, rising from 1,001,933 thousand US$ in 2017 to 2,891,672 thousand US$ in 2021. A slight dip was observed in 2019, followed by a substantial surge in 2020, where FCFF more than doubled from its 2019 level, indicating a heightened capacity to generate returns for all capital providers.
- Cash Conversion and Capital Efficiency
- The relationship between operating cash flow and FCFF suggests a disciplined management of capital expenditures. There is an observable increase in the efficiency of converting operating cash into free cash flow; the margin between the two metrics tightened significantly in 2020 and 2021, indicating that a higher percentage of operating cash was retained as FCFF during the latter part of the period.
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Interest Paid, Net of Tax
O’Reilly Automotive Inc., interest paid, net of tax calculation
US$ in thousands
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, net of capitalized interest, tax = Interest paid, net of capitalized interest × EITR
= 144,293 × 22.19% = 32,019
3 2021 Calculation
Interest costs capitalized, tax = Interest costs capitalized × EITR
= 7,000 × 22.19% = 1,553
Analysis of the financial data from 2017 to 2021 reveals a significant expansion in interest-related cash outflows and a stabilization of the corporate tax burden.
- Net Interest Paid Trends
- Interest paid, net of capitalized interest and tax, exhibited a strong upward trajectory from 2017 to 2020, increasing from 53,837 thousand US$ to a peak of 123,493 thousand US$. This represents a growth of approximately 129% over a four-year period. A moderate reduction was observed in 2021, with the value retreating to 112,274 thousand US$.
- Capitalized Interest Expenditure
- Interest costs capitalized, net of tax, followed a bell-curve trajectory, rising from 5,885 thousand US$ in 2017 to a peak of 10,101 thousand US$ in 2019. A subsequent decline occurred through 2020 and 2021, ending at 5,447 thousand US$, which indicates a decrease in the volume of interest-bearing capital investments toward the end of the period.
- Effective Income Tax Rate (EITR) Stability
- A sharp decline in the effective income tax rate was recorded between 2017 and 2018, falling from 30.77% to 21.82%. Following this adjustment, the rate remained remarkably stable, fluctuating within a narrow range between 21.82% and 22.68% through 2021.
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Enterprise Value to FCFF Ratio, Current
O’Reilly Automotive Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 55,622,513) |
| Free cash flow to the firm (FCFF) | 2,891,672) |
| Valuation Ratio | |
| EV/FCFF | 19.24 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Amazon.com Inc. | 281.35 |
| Home Depot Inc. | 28.41 |
| Lowe’s Cos. Inc. | 18.89 |
| TJX Cos. Inc. | 29.96 |
| EV/FCFF, Sector | |
| Consumer Discretionary Distribution & Retail | 209.41 |
| EV/FCFF, Industry | |
| Consumer Discretionary | 82.17 |
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
O’Reilly Automotive 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 thousands) | ||||||
| Enterprise value (EV)1 | 46,704,845) | 35,063,126) | 31,466,172) | 32,224,896) | 23,363,639) | |
| Free cash flow to the firm (FCFF)2 | 2,891,672) | 2,518,174) | 1,202,252) | 1,327,389) | 1,001,933) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 16.15 | 13.92 | 26.17 | 24.28 | 23.32 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | 20.22 | — | — | — | — | |
| Lowe’s Cos. Inc. | 14.88 | — | — | — | — | |
| TJX Cos. Inc. | 18.30 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 130.00 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Consumer Discretionary | 60.31 | — | — | — | — | |
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
= 46,704,845 ÷ 2,891,672 = 16.15
4 Click competitor name to see calculations.
Between 2017 and 2021, the Enterprise Value (EV) and Free Cash Flow to the Firm (FCFF) both demonstrated a general upward trajectory, although the growth rates diverged significantly mid-period, leading to a compression of the EV/FCFF ratio.
- Enterprise Value Analysis
- The Enterprise Value grew from $23,363,639 thousand in 2017 to $46,704,845 thousand in 2021. This indicates a substantial increase in the total market value of the firm over the five-year period, with the most aggressive growth occurring between 2020 and 2021, where the value increased by approximately $11.6 billion.
- Free Cash Flow to the Firm (FCFF) Analysis
- FCFF exhibited consistent growth, starting at $1,001,933 thousand in 2017 and reaching $2,891,672 thousand by 2021. A critical inflection point is observed between 2019 and 2020, where FCFF more than doubled from $1,202,252 thousand to $2,518,174 thousand, signaling a sharp improvement in the firm's ability to generate cash available to all capital providers.
- EV/FCFF Ratio Trends
- The EV/FCFF ratio moved through two distinct phases. From 2017 to 2019, the ratio trended upward from 23.32 to 26.17, suggesting that the enterprise value was increasing faster than the generated cash flows. In 2020, the ratio experienced a sharp correction, falling to 13.92. This decline was primarily driven by the surge in FCFF rather than a decrease in EV. By 2021, the ratio moderated slightly to 16.15, indicating that while the company remains valued at a premium, the valuation is more closely supported by fundamentally stronger cash flow generation than in the 2017–2019 period.
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