Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
PayPal Holdings Inc., FCFE 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).
The financial performance between 2018 and 2022 is characterized by fluctuations in operational cash generation and significant volatility in free cash flow to equity (FCFE). While net cash provided by operating activities remained relatively stable, FCFE experienced more pronounced swings, indicating varying levels of capital expenditures or net borrowing over the period.
- Operating Cash Flow Trends
- Net cash provided by operating activities exhibited a non-linear trend. After an initial decrease from 5,483 million in 2018 to 4,561 million in 2019, a recovery phase occurred, peaking at 6,340 million in 2021. A subsequent decline to 5,813 million was observed in 2022, returning the metric to levels similar to those seen in 2020.
- Free Cash Flow to Equity (FCFE) Dynamics
- FCFE demonstrated substantial growth in the early part of the period, rising from 5,623 million in 2018 to a peak of 9,074 million in 2020. This upward trajectory was interrupted by a sharp contraction in 2021, where FCFE fell to 5,348 million. However, a recovery followed in 2022, with the figure increasing to 6,901 million.
- Comparative Analysis of Cash Flows
- In four of the five years analyzed (2018, 2019, 2020, and 2022), FCFE exceeded net cash provided by operating activities. This pattern suggests that net borrowing or other financing inflows outweighed capital expenditures during these intervals. Conversely, 2021 stands as an outlier where FCFE dropped below operating cash flow, indicating a period of higher capital investment or significant debt repayment.
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Price to FCFE Ratio, Current
PayPal Holdings Inc., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 1,115,713,968 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | 6,901) |
| FCFE per share | 6.19 |
| Current share price (P) | 65.91 |
| Valuation Ratio | |
| P/FCFE | 10.66 |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| Accenture PLC | 8.12 |
| Adobe Inc. | 8.94 |
| AppLovin Corp. | 22.89 |
| Cadence Design Systems Inc. | 60.97 |
| Datadog Inc. | 356.81 |
| International Business Machines Corp. | 14.52 |
| Intuit Inc. | 7.29 |
| Microsoft Corp. | 60.06 |
| Oracle Corp. | 26.04 |
| Palantir Technologies Inc. | 215.93 |
| Palo Alto Networks Inc. | 83.23 |
| Salesforce Inc. | 9.75 |
| ServiceNow Inc. | 30.65 |
| Synopsys Inc. | 6.34 |
| Workday Inc. | 16.15 |
| P/FCFE, Sector | |
| Software & Services | 59.04 |
| P/FCFE, Industry | |
| Information Technology | 82.69 |
Based on: 10-K (reporting date: 2022-12-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
PayPal Holdings Inc., historical P/FCFE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,131,373,298 | 1,165,004,913 | 1,171,175,760 | 1,172,955,485 | 1,173,209,367 | |
| Selected Financial Data (US$) | ||||||
| Free cash flow to equity (FCFE) (in millions)2 | 6,901) | 5,348) | 9,074) | 6,829) | 5,623) | |
| FCFE per share3 | 6.10 | 4.59 | 7.75 | 5.82 | 4.79 | |
| Share price1, 4 | 80.80 | 124.30 | 269.44 | 119.89 | 90.85 | |
| Valuation Ratio | ||||||
| P/FCFE5 | 13.25 | 27.08 | 34.78 | 20.59 | 18.96 | |
| Benchmarks | ||||||
| P/FCFE, Competitors6 | ||||||
| Accenture PLC | 17.87 | 25.76 | 19.01 | — | — | |
| Adobe Inc. | 21.32 | 34.26 | 41.36 | — | — | |
| AppLovin Corp. | — | 22.51 | — | — | — | |
| Cadence Design Systems Inc. | 33.41 | 36.31 | — | — | — | |
| Datadog Inc. | 69.38 | 202.25 | — | — | — | |
| International Business Machines Corp. | 11.97 | 48.45 | — | — | — | |
| Intuit Inc. | 13.86 | 86.74 | — | — | — | |
| Microsoft Corp. | 36.73 | 42.54 | — | — | — | |
| Oracle Corp. | — | 8.36 | — | — | — | |
| Palantir Technologies Inc. | 96.89 | 198.12 | — | — | — | |
| Palo Alto Networks Inc. | 29.54 | 32.91 | — | — | — | |
| Salesforce Inc. | 16.56 | 49.52 | — | — | — | |
| ServiceNow Inc. | 44.44 | 64.54 | — | — | — | |
| Synopsys Inc. | 33.41 | 40.55 | 45.07 | — | — | |
| Workday Inc. | 49.17 | 40.57 | — | — | — | |
| P/FCFE, Sector | ||||||
| Software & Services | 31.24 | 34.11 | — | — | — | |
| P/FCFE, Industry | ||||||
| Information Technology | 26.68 | 27.39 | — | — | — | |
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).
1 Data adjusted for splits and stock dividends.
3 2022 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 6,901,000,000 ÷ 1,131,373,298 = 6.10
4 Closing price as at the filing date of PayPal Holdings Inc. Annual Report.
5 2022 Calculation
P/FCFE = Share price ÷ FCFE per share
= 80.80 ÷ 6.10 = 13.25
6 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by significant volatility in market valuation and a fluctuating capacity for free cash flow generation. The most prominent trend is the dramatic expansion and subsequent contraction of the Price to Free Cash Flow to Equity (P/FCFE) ratio, peaking in 2020 before declining to a five-year low in 2022.
- Share Price Volatility
- The share price experienced a rapid ascent from 90.85 US$ in 2018 to a peak of 269.44 US$ in 2020. This was followed by a sharp correction, with the price falling to 124.30 US$ in 2021 and further declining to 80.80 US$ by the end of 2022, marking a valuation lower than the 2018 baseline.
- FCFE per Share Trends
- Free Cash Flow to Equity per share showed steady growth between 2018 and 2020, rising from 4.79 US$ to 7.75 US$. A notable contraction occurred in 2021, where FCFE per share dropped to 4.59 US$, the lowest point in the analyzed period. However, a recovery was observed in 2022, with the figure increasing to 6.10 US$.
- P/FCFE Ratio Analysis
- The P/FCFE ratio reflects a significant valuation premium in 2020, reaching 34.78, which indicates that the market price grew at a rate far exceeding the growth of cash flows. From 2021 onwards, a downward trend emerged, culminating in a ratio of 13.25 in 2022. This suggests a substantial market re-rating where the share price contracted more aggressively than the underlying cash flow per share, resulting in a more conservative valuation multiple by the end of the period.
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