Enterprise Value to FCFF (EV/FCFF)
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CVS Health Corp. pages available for free this week:
- Statement of Comprehensive Income
- Cash Flow Statement
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Price to Operating Profit (P/OP) since 2005
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Free Cash Flow to The Firm (FCFF)
CVS Health Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
The financial data presents an analysis of cash flow metrics over a five-year period, from 2020 to 2024. Two key indicators, net cash provided by operating activities and free cash flow to the firm (FCFF), are tracked to assess liquidity and operational efficiency.
- Net cash provided by operating activities
- The net cash generated from core business operations exhibits a general downward trend following a peak in 2021. Specifically, the amount increased from 15,865 million USD in 2020 to 18,265 million USD in 2021, which suggests enhanced operational cash generation during that period. However, this figure subsequently declined to 16,177 million USD in 2022, further reduced to 13,426 million USD in 2023, and dropped sharply to 9,107 million USD by 2024. This continuous decline over the last three years may indicate decreasing operational efficiency, rising operational costs, or adverse market conditions impacting cash inflows from regular business activities.
- Free cash flow to the firm (FCFF)
- The FCFF metric, which represents the cash generated after accounting for capital expenditures, follows a parallel downward movement relative to operating cash flows. Starting at 15,568 million USD in 2020, FCFF rises to its highest level of 17,617 million USD in 2021. Thereafter, it declines to 15,107 million USD in 2022, decreases further to 12,206 million USD in 2023, and reaches 8,496 million USD by 2024. This decrease in free cash flow suggests increasing spending on capital investments or reduced cash efficiency in the firm's operations, thereby limiting the funds available for debt repayment, dividends, or reinvestment.
Overall, both metrics peaked in 2021 and have subsequently experienced consistent declines through 2024. This reveals a contraction in cash generation capabilities over the most recent three years examined. The patterns suggest potential challenges in maintaining operational cash flows or higher capital expenditures impacting free cash flow, warranting further investigation into underlying causes such as market environment changes, cost structures, or investment strategies.
Interest Paid, Net of Tax
CVS Health Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
2 2024 Calculation
Interest paid, tax = Interest paid × EITR
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited moderate fluctuations over the five-year period. Beginning at 26.3% in 2020, it decreased notably to 24.2% in 2021, indicating a reduction in tax burden or changes in tax strategy. Subsequently, the rate increased to 26% in 2022, before slightly declining in 2023 to 25.1%. In 2024, there was a modest increase again to 25.4%. Overall, the EITR remained within a narrow band close to the mid-20% range, reflecting relative stability in the company's effective tax rate with minor year-to-year variations.
- Interest Paid, Net of Tax
- Interest payments, net of tax, showed a generally downward trend from 2020 through 2022, decreasing from $2,140 million in 2020 to $1,657 million in 2022. This decline suggests effective management of interest expenses or possible debt reduction strategies during this interval. However, a reversal occurred in 2023, with interest paid rising to $1,811 million, followed by a more pronounced increase in 2024 to $2,170 million, surpassing the 2020 level. This rise in the latest years could be indicative of increased borrowing, higher interest rates, or changes in capital structure leading to greater interest expenses.
Enterprise Value to FCFF Ratio, Current
CVS Health Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | |
| Elevance Health Inc. | |
| Intuitive Surgical Inc. | |
| Medtronic PLC | |
| UnitedHealth Group Inc. | |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | |
| EV/FCFF, Industry | |
| Health Care | |
Based on: 10-K (reporting date: 2024-12-31).
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
CVS Health Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | ||||||
| EV/FCFF, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
3 2024 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
The enterprise value (EV) of the company experienced fluctuations across the observed periods. Notably, it rose from 146,595 million USD at the end of 2020 to a peak of 181,495 million USD by the end of 2021. Subsequently, there was a gradual decline in EV, reaching 135,154 million USD by the end of 2024.
Free cash flow to the firm (FCFF) displayed a general downward trend after 2021. It increased from 15,568 million USD at the end of 2020 to 17,617 million USD at the end of 2021, then consistently decreased in subsequent years, reaching 8,496 million USD by the end of 2024.
The EV/FCFF ratio highlights the relationship between enterprise value and cash flow generation capability. This ratio increased steadily from 9.42 at the end of 2020 to 15.91 by the end of 2024. The rising ratio indicates that the enterprise value is growing relative to the free cash flow or, more specifically, that the firm's ability to generate free cash flow is diminishing in comparison to its value.
- Enterprise Value Trends
- The peak in 2021 followed by a decline suggests changes in market perception, valuation adjustments, or operational shifts impacting the company's overall value.
- Free Cash Flow to the Firm Trends
- The decrease in free cash flow after 2021 highlights reduced cash-generating efficiency or increased operational costs, impacting the firm’s liquidity and potentially its investment capacity.
- EV/FCFF Ratio Implications
- The increasing EV/FCFF ratio over the years signals either an overvaluation risk or a deterioration in cash flow performance, necessitating careful monitoring for sustainability and valuation accuracy.