Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Allergan PLC, FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial data demonstrates fluctuations in the net cash provided by operating activities and free cash flow to the firm across the period from 2015 to 2019. Several key observations can be derived from these trends.
- Net cash provided by operating activities
- The net cash provided by operating activities shows significant variability over the analyzed years. In 2015, the cash generated was relatively high. However, there was a notable decline in 2016, reaching the lowest point within the period. After 2016, a substantial recovery is evident in 2017 and 2018, with amounts exceeding those reported in the previous years apart from 2015. By 2019, this metric achieves the highest value in the five-year span, indicating strong cash generation capabilities from core operations.
- Free cash flow to the firm (FCFF)
- The free cash flow to the firm closely follows the pattern of net cash provided by operating activities, reinforcing the observed cash flow trends. Starting with a robust figure in 2015, the FCFF also experiences a decline in 2016, mirroring the operational cash flow drop. From 2017 onwards, free cash flow demonstrates consistent improvement with a gradual increase each year, peaking in 2019. This reflects effective management of capital expenditures and operational efficiency, as FCFF is a comprehensive measure considering investments and operating cash.
Overall, the period shows a recovery and strengthening in cash flow generation after a dip in 2016, culminating in the highest operational and free cash flow levels by the end of 2019. This suggests an improving operating environment and enhanced liquidity position in recent years, enhancing the firm's financial flexibility.
Interest Paid, Net of Tax
Allergan PLC, interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
2 2019 Calculation
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 784,900 × 12.50% = 98,113
- Effective Income Tax Rate (EITR)
- The effective income tax rate showed significant volatility between 2015 and 2019. It started at 35.3% in 2015 and increased sharply to 67% in 2016, indicating a substantial rise in tax burden or changes in tax regulations or profit composition during that year. Following this peak, the EITR decreased markedly to 37% in 2017 and continued to decline in subsequent years, reaching 25.6% in 2018 and further dropping to 12.5% by 2019. This downward trend in the latter years suggests improved tax efficiency or possible tax benefits realized by the company.
- Cash Paid During the Year for Interest, Net of Tax (US$ in thousands)
- The cash outflow for interest payments, net of tax, exhibited an overall increasing trend from 2015 through 2017. It was $446,365 thousand in 2015, slightly decreased to $421,707 thousand in 2016, then rose significantly to $720,972 thousand in 2017. In 2018 and 2019, the interest paid remained at a high level, with $718,481 thousand and $686,788 thousand respectively, indicating sustained high debt servicing costs. The increase between 2016 and 2017 may suggest additional borrowing or higher interest rates on existing debt. The relatively stable but elevated amounts during 2017 to 2019 imply stable debt levels or consistent financing costs during this period.
Enterprise Value to FCFF Ratio, Current
Allergan PLC, current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 80,406,121) |
| Free cash flow to the firm (FCFF) | 7,515,688) |
| Valuation Ratio | |
| EV/FCFF | 10.70 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| AbbVie Inc. | 19.86 |
| Amgen Inc. | 15.58 |
| Bristol-Myers Squibb Co. | 8.84 |
| Danaher Corp. | 28.07 |
| Eli Lilly & Co. | 182.94 |
| Gilead Sciences Inc. | 14.36 |
| Johnson & Johnson | 18.04 |
| Merck & Co. Inc. | 12.16 |
| Pfizer Inc. | 15.12 |
| Regeneron Pharmaceuticals Inc. | 14.29 |
| Thermo Fisher Scientific Inc. | 21.05 |
| Vertex Pharmaceuticals Inc. | — |
Based on: 10-K (reporting date: 2019-12-31).
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
Allergan PLC, historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 81,899,299) | 68,163,995) | 82,757,462) | 106,734,788) | 164,192,969) | |
| Free cash flow to the firm (FCFF)2 | 7,515,688) | 6,135,481) | 5,637,272) | 1,546,907) | 4,506,865) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 10.90 | 11.11 | 14.68 | 69.00 | 36.43 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
3 2019 Calculation
EV/FCFF = EV ÷ FCFF
= 81,899,299 ÷ 7,515,688 = 10.90
4 Click competitor name to see calculations.
The financial data illustrates notable fluctuations and trends over the five-year period ending in 2019, specifically in enterprise value (EV), free cash flow to the firm (FCFF), and their derived valuation ratio EV/FCFF.
- Enterprise Value (EV)
- The enterprise value shows a marked downward trend from 2015 to 2018, decreasing consistently from approximately 164.2 billion US dollars in 2015 to about 68.2 billion US dollars by the end of 2018. In 2019, an uptick is observed with EV increasing to roughly 81.9 billion US dollars, indicating a reversal of the previous decline. This suggests that market perceptions, capitalization, or changes in net debt components experienced significant shifts during the period, particularly a recovery or reassessment occurring in 2019.
- Free Cash Flow to the Firm (FCFF)
- FCFF displays a more volatile pattern without a clear directional trend. Starting at approximately 4.5 billion US dollars in 2015, it significantly declines to about 1.5 billion in 2016, recovered strongly in 2017 to nearly 5.6 billion, and continues to rise modestly through 2018 and 2019, reaching about 7.5 billion in 2019. The 2016 dip followed by recovery indicates a period of operational challenges or investment that impacted cash flow, with subsequent years reflecting stabilization and growth in cash generation capacity.
- EV/FCFF Ratio
- The EV to FCFF ratio, a valuation multiple, shows considerable variation as a result of changes in both EV and FCFF. The ratio peaks sharply in 2016 at 69, reflecting either an extremely high EV relative to a low FCFF or other valuation distortions. Subsequent years demonstrate a pronounced decrease in this ratio to roughly 14.7 in 2017 and further declines to near 10.9 by 2019. This trend suggests increasing attractiveness from a valuation perspective based on cash flow, likely driven by improved cash flow generation and reduced enterprise value.
Overall, the data reflect a significant decline in enterprise value through 2018, potentially indicating adverse market or company-specific conditions, followed by partial recovery in 2019. Free cash flow experienced a dip but then demonstrated robust growth, supporting a declining and more favorable EV/FCFF valuation multiple. These patterns could imply a transition period characterized by initial challenges followed by operational improvement and investor confidence recalibration.