Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Best Buy Co. Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
The financial performance from 2017 to 2022 demonstrates a period of volatility characterized by a significant surge in liquidity during the 2021 fiscal year. Both cash provided by operating activities and Free Cash Flow to the Firm (FCFF) exhibit a strong positive correlation, indicating that fluctuations in free cash flow are primarily driven by operational results rather than changes in investment strategy.
- Operating Cash Flow Trends
- Cash provided by operating activities decreased from US$ 2,545 million in 2017 to US$ 2,141 million in 2018, before recovering to US$ 2,565 million by 2020. A significant peak was recorded in 2021, with cash flows reaching US$ 4,927 million, followed by a reduction to US$ 3,252 million in 2022.
- Free Cash Flow to the Firm Dynamics
- FCFF closely mirrored the trajectory of operating cash flows, experiencing a decline to US$ 1,498 million in 2018 and a subsequent recovery to US$ 1,870 million in 2020. The most notable increase occurred in 2021, where FCFF surged to US$ 4,252 million. In 2022, the figure normalized to US$ 2,533 million, which exceeds the baseline levels established between 2018 and 2020.
- Analysis of Capital Allocation
- The variance between operating cash flow and FCFF remained relatively constrained over the observed period, typically ranging between US$ 500 million and US$ 800 million. This stability suggests that capital expenditures did not fluctuate drastically, and the expansion of FCFF in 2021 was the result of enhanced operational cash generation rather than a reduction in capital investment.
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Interest Paid, Net of Tax
Best Buy Co. Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 22 × 19.00% = 4
The net interest payments exhibited moderate volatility between 2017 and 2020 before entering a period of significant decline. From a peak of 55 million USD in 2019, the interest paid, net of tax, fell to 18 million USD by January 29, 2022, representing a substantial reduction in after-tax financing costs over the analyzed period.
- Net Interest Payment Trends
- A fluctuating pattern is observed from 2017 to 2020, with values oscillating between 45 million USD and 55 million USD. A definitive downward trajectory commenced after 2019, with the most pronounced decrease occurring between 2021 and 2022, where the net interest expense declined by approximately 52% in a single fiscal year.
- Effective Income Tax Rate Correlation
- The effective income tax rate showed significant instability, peaking at 45% in 2018 before dropping sharply to 22.4% in 2019 and remaining relatively stable between 19% and 24% thereafter. Because net interest paid is calculated after tax benefits, the marked decline in net payments despite a generally lower tax rate since 2019 indicates a substantial reduction in the underlying gross interest expense.
- Capital Cost Trajectory
- The overall movement suggests a strategic reduction in debt obligations or a refinancing of liabilities at lower rates. The final recorded value of 18 million USD in 2022 is the lowest in the six-year series, signaling a strengthened capacity to manage financing costs and a reduction in the tax-shielded cost of debt.
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Enterprise Value to FCFF Ratio, Current
Best Buy Co. Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 16,720) |
| Free cash flow to the firm (FCFF) | 2,533) |
| Valuation Ratio | |
| EV/FCFF | 6.60 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Amazon.com Inc. | 281.35 |
| Home Depot Inc. | 28.41 |
| Lowe’s Cos. Inc. | 18.89 |
| TJX Cos. Inc. | 29.96 |
| EV/FCFF, Sector | |
| Consumer Discretionary Distribution & Retail | 231.81 |
| EV/FCFF, Industry | |
| Consumer Discretionary | 91.88 |
Based on: 10-K (reporting date: 2022-01-29).
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
Best Buy Co. Inc., historical EV/FCFF calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 21,230) | 25,436) | 12,068) | 18,449) | 17,707) | 11,308) | |
| Free cash flow to the firm (FCFF)2 | 2,533) | 4,252) | 1,870) | 1,644) | 1,498) | 2,014) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | 8.38 | 5.98 | 6.45 | 11.22 | 11.82 | 5.62 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| Amazon.com Inc. | — | — | — | — | — | — | |
| Home Depot Inc. | 25.12 | 20.22 | — | — | — | — | |
| Lowe’s Cos. Inc. | 19.56 | 14.88 | — | — | — | — | |
| TJX Cos. Inc. | 33.03 | 18.30 | — | — | — | — | |
| EV/FCFF, Sector | |||||||
| Consumer Discretionary Distribution & Retail | 111.04 | 130.00 | — | — | — | — | |
| EV/FCFF, Industry | |||||||
| Consumer Discretionary | 51.09 | 60.31 | — | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 21,230 ÷ 2,533 = 8.38
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibited significant volatility between 2017 and 2022, reflecting fluctuating market valuations and inconsistent cash flow generation over the six-year period.
- Enterprise Value Trends
- Enterprise value experienced substantial shifts, rising from 11,308 million USD in 2017 to a peak of 25,436 million USD in 2021. A notable contraction occurred in 2020, where the value dropped to 12,068 million USD, before rebounding sharply in 2021 and slightly moderating to 21,230 million USD by 2022.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated an inconsistent trajectory, reaching a period low of 1,498 million USD in 2018. A significant surge occurred in 2021, with FCFF peaking at 4,252 million USD, representing a substantial increase over the 1,870 million USD recorded in 2020. This growth was not sustained into 2022, as FCFF declined to 2,533 million USD.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio reached its highest points in 2018 (11.82) and 2019 (11.22), indicating a higher valuation relative to the cash flows generated during those years. A marked correction occurred between 2020 and 2021, with the ratio descending to 5.98, primarily driven by the exceptional spike in FCFF in 2021. The ratio subsequently increased to 8.38 in 2022, reflecting a decrease in cash flow efficiency relative to the enterprise valuation.
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