AbbVie Inc. (ABBV)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

AbbVie Inc., FCFF calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net earnings	5,309	5,953	5,144	1,774	4,128
Net noncash charges	4,642	2,777	1,887	2,563	1,481
Changes in operating assets and liabilities, net of acquisitions	9	(1,689)	504	(788)	658
Cash flows from operating activities	9,960	7,041	7,535	3,549	6,267
Interest paid, net of portion capitalized, net of tax¹	755	744	415	314	219
Acquisitions of property and equipment	(529)	(479)	(532)	(612)	(491)
Free cash flow to the firm (FCFF)	10,186	7,306	7,418	3,251	5,995

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the AbbVie Inc.'s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	AbbVie Inc.'s FCFF declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

AbbVie Inc., interest paid, net of tax calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Effective Income Tax Rate (EITR)

EITR¹	31.30%	24.50%	22.60%	25.10%	22.60%
Interest Paid, Net of Tax
Interest paid, net of portion capitalized, before tax	1,099	986	536	419	283
Less: Interest paid, net of portion capitalized, tax²	344	242	121	105	64
Interest paid, net of portion capitalized, net of tax	755	744	415	314	219

2017 Calculations

² Interest paid, net of portion capitalized, tax = Interest paid, net of portion capitalized × EITR
= 1,099 × 31.30% = 344

AbbVie Inc., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	177,357
Free cash flow to the firm (FCFF)	10,186
Ratio
EV/FCFF	17.41
Benchmarks
EV/FCFF, Competitors
Abbott Laboratories	26.74
Allergan PLC	15.63
Amgen Inc.	11.10
Biogen Inc.	20.53
Bristol-Myers Squibb Co.	20.33
Celgene Corp.	13.54
Eli Lilly & Co.	20.39
Gilead Sciences Inc.	9.19
Johnson & Johnson	20.11
Merck & Co. Inc.	36.25
Pfizer Inc.	14.17
Regeneron Pharmaceuticals Inc.	32.44
EV/FCFF, Sector
Pharmaceuticals & Biotechnology	17.30
EV/FCFF, Industry
Health Care	18.00

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

AbbVie Inc., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	215,913	128,875	110,738	104,342	85,906
Free cash flow to the firm (FCFF)²	10,186	7,306	7,418	3,251	5,995
Ratio
EV/FCFF³	21.20	17.64	14.93	32.10	14.33
Benchmarks
EV/FCFF, Competitors
Abbott Laboratories	26.99	36.35	30.00	27.54	25.21
Allergan PLC	15.54	69.00	36.43	39.81	40.63
Amgen Inc.	11.16	11.23	11.51	13.76	16.49
Biogen Inc.	26.28	14.61	20.11	34.00	32.88
Bristol-Myers Squibb Co.	24.77	51.76	87.88	35.51	28.83
Celgene Corp.	14.13	23.00	35.79	34.75	30.18
Eli Lilly & Co.	19.87	23.22	43.88	24.69	12.89
Gilead Sciences Inc.	9.72	6.44	6.51	12.63	43.41
Johnson & Johnson	20.44	19.65	16.62	17.44	17.27
Merck & Co. Inc.	33.91	20.51	13.16	24.11	16.28
Pfizer Inc.	13.91	14.94	14.19	12.81	11.91
Regeneron Pharmaceuticals Inc.	32.57	38.99	57.44	97.24	73.58
EV/FCFF, Sector
Pharmaceuticals & Biotechnology	18.02	17.50	16.56	20.04	18.65
EV/FCFF, Industry
Health Care	18.52	18.16	16.97	19.42	17.84

2017 Calculations

³ EV/FCFF = EV ÷ FCFF
= 215,913 ÷ 10,186 = 21.20

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	AbbVie Inc.'s EV/FCFF ratio increased from 2015 to 2016 and from 2016 to 2017.