Enterprise Value to FCFF (EV/FCFF)
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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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Free Cash Flow to The Firm (FCFF)
Paramount Global, FCFF calculation
US$ in millions
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).
- Operating Activities Cash Flow
- The net cash flow generated from operating activities experienced variability over the five-year period. Initially, it registered a strong inflow of $1,425 million in 2018, followed by a slight decline to $1,230 million in 2019. A notable increase occurred in 2020, reaching $2,215 million, which marks the highest value in the period under review. However, this was followed by a sharp contraction to $835 million in 2021, and a further decrease culminating in a negative cash flow of -$142 million by the end of 2022.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm demonstrated a broadly positive trend with fluctuations. Starting at $1,662 million in 2018, it slightly declined to $1,605 million in 2019. The year 2020 saw a significant increase to $2,692 million, representing the peak value in the series. Subsequently, free cash flow decreased to $1,331 million in 2021, and further diminished to $255 million as of the end of 2022, though it remained positive.
- Overall Cash Flow Analysis
- The cash flow metrics indicate strong performance in 2020, with both operating cash flow and free cash flow reaching their highest levels. However, there was a marked downturn in cash generation after 2020. The negative operating cash flow in 2022 is a critical concern, indicating potential operational challenges or increased expenditures not offset by revenues. Although free cash flow to the firm remained positive in 2022, it sharply declined, suggesting reduced financial flexibility.
- Implications
- The data suggests that the company experienced favorable cash flow conditions in 2020 but faced increasing pressure in subsequent years, particularly in operating cash generation. The negative operating cash flow in 2022 may require management attention to address operational efficiency or cost structure. The decline in free cash flow also points to potential constraints on investment capacity or debt servicing ability if this trend persists.
Interest Paid, Net of Tax
Paramount Global, interest paid, net of tax calculation
US$ in millions
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
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited a fluctuating pattern over the five-year period. It increased sharply from 11.93% in 2018 to 21% in 2019, indicating a significant rise in tax burden during that year. Subsequently, the rate decreased to 17% in 2020 and further declined to 12.41% in 2021, reflecting a substantial reduction in tax expenses relative to income. In 2022, the rate rose again to 17.93%, suggesting an increase in income tax liability compared to the prior year.
- Cash Paid for Interest, Net of Tax
- The cash paid for interest, net of tax, showed an overall upward trend from 2018 through 2021 before declining slightly in 2022. Beginning at $402 million in 2018, the interest payments nearly doubled to $728 million in 2019 and continued to rise to $801 million in 2020 and $850 million in 2021. However, in 2022, the figure decreased marginally to $755 million. This pattern may indicate increased borrowing or higher interest rates during the years 2019 to 2021, followed by a slight decrease in interest expenses in 2022.
Enterprise Value to FCFF Ratio, Current
Paramount Global, current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Alphabet Inc. | |
| Comcast Corp. | |
| Meta Platforms Inc. | |
| Netflix Inc. | |
| Take-Two Interactive Software Inc. | |
| Walt Disney Co. | |
| EV/FCFF, Sector | |
| Media & Entertainment | |
| EV/FCFF, Industry | |
| Communication Services | |
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
Paramount Global, 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 millions) | ||||||
| Enterprise value (EV)1 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
| EV/FCFF, Sector | ||||||
| Media & Entertainment | ||||||
| EV/FCFF, Industry | ||||||
| Communication Services | ||||||
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
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value showed a general increasing trend from 2018 through 2020, rising from approximately 28.7 billion USD to 58.1 billion USD, representing a more than doubling within this period. However, this was followed by a sharp decline in 2021 to around 35.4 billion USD, and a further decrease in 2022 to approximately 28.8 billion USD. The trend indicates a peak in enterprise value in 2020 with a significant reduction over the subsequent two years, returning roughly to the 2018 value by the end of 2022.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm exhibited variability over the analyzed years. Starting at 1.66 billion USD in 2018, it remained relatively stable into 2019 with a slight decline to 1.61 billion USD. There was a notable increase in 2020, reaching 2.69 billion USD. This improvement was not sustained, as FCFF declined sharply in 2021 to 1.33 billion USD and further dropped to a low of 0.255 billion USD in 2022, indicating a substantial contraction in cash flow generation.
- EV to FCFF Ratio
- This ratio, which reflects the valuation of enterprise value relative to free cash flow, increased from 17.27 in 2018 to a peak above 26.5 in 2021, after generally rising from 22.5 in 2019 and 21.6 in 2020. A dramatic spike occurred in 2022, with the ratio climbing sharply to 112.99. The pronounced surge in this metric in 2022 is primarily attributed to the steep decline in free cash flow while enterprise value remained relatively stable compared to prior years, suggesting the company was valued very highly in relation to its diminished cash flow generation capacity at that time.
- Overall Observations
- The data reveals a company whose enterprise value peaked in 2020 and then retreated to previous levels by 2022. Meanwhile, the free cash flow to the firm was highest in 2020 but experienced a marked decline in the following years, ending much lower in 2022. The EV/FCFF ratio's spike in 2022 signals a significant divergence between valuation and cash flow performance, potentially indicating market concerns regarding cash flow sustainability or other underlying operational challenges. This divergence may warrant further examination to understand the drivers behind the cash flow contraction and market valuation dynamics.