Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Teradyne Inc., 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).
An analysis of the cash flow metrics reveals a cyclical trend characterized by significant growth between 2019 and 2021, followed by a sharp correction in 2022 and relative stabilization in 2023.
- Operating Cash Flow Dynamics
- Net cash provided by operating activities exhibited a strong upward trajectory in the initial three-year period, increasing from 578,750 thousand USD in 2019 to a peak of 1,098,366 thousand USD in 2021. This growth was followed by a substantial contraction in 2022, where the value returned to 2019 levels at 577,923 thousand USD, remaining largely flat through 2023 at 585,231 thousand USD.
- Free Cash Flow to the Firm (FCFF) Trends
- FCFF mirrored the movement of operating cash flow, starting at 449,438 thousand USD in 2019 and reaching a maximum of 969,596 thousand USD in 2021. A significant decline occurred in 2022, with FCFF dropping to 415,949 thousand USD, before experiencing a marginal recovery to 425,842 thousand USD in 2023.
- Cash Flow Conversion and Capital Allocation
- The relationship between operating cash flow and FCFF indicates a high conversion rate during the peak year of 2021. However, a comparative analysis shows that the gap between these two metrics widened proportionally in 2022 and 2023, suggesting that capital expenditures remained more significant relative to total cash generation during the period of lower operating performance than they were during the growth peak.
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Interest Paid, Net of Tax
Teradyne Inc., 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, tax = Cash paid for interest × EITR
= 296 × 14.60% = 43
Analysis of the five-year period reveals a substantial and accelerating decrease in net cash outflows for interest. Following a peak in 2020, the amount paid for interest, net of tax, experienced a consistent and sharp decline, reaching a minimum by the end of 2023.
- Interest Expense Trajectory
- Cash paid for interest, net of tax, rose slightly from 5,330 thousand US dollars in 2019 to 5,598 thousand US dollars in 2020. Subsequently, a precipitous decline occurred over the following three years, with values dropping to 3,702 thousand US dollars in 2021, 1,275 thousand US dollars in 2022, and finally 253 thousand US dollars in 2023. This trajectory indicates a significant reduction in the net cost of borrowing or a strategic reduction in debt obligations.
- Effective Income Tax Rate Correlation
- The effective income tax rate exhibited a general upward trend, moving from 11.10% in 2019 to 14.60% in 2023. Although the rate peaked at 14.90% in 2022, the relatively tight variance in the tax rate suggests that the dramatic decrease in net interest paid was primarily driven by a reduction in gross interest payments rather than fluctuations in tax shielding efficiencies.
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Enterprise Value to FCFF Ratio, Current
Teradyne Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 17,982,391) |
| Free cash flow to the firm (FCFF) | 425,842) |
| Valuation Ratio | |
| EV/FCFF | 42.23 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Advanced Micro Devices Inc. | 172.20 |
| Analog Devices Inc. | 44.34 |
| Applied Materials Inc. | 66.82 |
| Broadcom Inc. | 60.03 |
| Intel Corp. | — |
| KLA Corp. | 62.18 |
| Lam Research Corp. | 76.80 |
| Marvell Technology Inc. | 149.19 |
| Micron Technology Inc. | 18.18 |
| NVIDIA Corp. | 55.73 |
| Qualcomm Inc. | 14.21 |
| Texas Instruments Inc. | 86.28 |
| EV/FCFF, Sector | |
| Semiconductors & Semiconductor Equipment | 293.16 |
| EV/FCFF, Industry | |
| Information Technology | 84.27 |
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
Teradyne Inc., 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 | 14,867,976) | 14,880,674) | 16,854,745) | 21,042,431) | 9,572,254) | |
| Free cash flow to the firm (FCFF)2 | 425,842) | 415,949) | 969,596) | 689,556) | 449,438) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 34.91 | 35.78 | 17.38 | 30.52 | 21.30 | |
| 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
= 14,867,976 ÷ 425,842 = 34.91
4 Click competitor name to see calculations.
The financial data reveals significant volatility in valuation and cash flow generation between 2019 and 2023. While the enterprise value reached its peak in 2020, the free cash flow to the firm achieved its highest level in 2021, leading to inconsistent trends in the valuation multiple over the five-year period.
- Enterprise Value (EV) Trends
- A sharp increase in enterprise value was observed in 2020, where the figure rose from 9.57 billion to 21.04 billion. This peak was followed by a consistent downward trend through 2022, eventually stabilizing at approximately 14.87 billion by the end of 2023.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated a steady growth pattern from 2019 to 2021, peaking at 969.6 million. However, a substantial contraction occurred in 2022, with FCFF dropping to 415.9 million. The value remained relatively flat in 2023, ending the period at 425.8 million.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio exhibits extreme fluctuations, shifting from 21.30 in 2019 to a low of 17.38 in 2021, and subsequently spiking to 35.78 in 2022. The expansion of the ratio in 2022 and 2023 is primarily driven by the deterioration of free cash flow rather than an increase in enterprise value. This suggests that the market valuation has remained relatively high despite a significant reduction in the company's ability to generate free cash flow to the firm.
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