Enterprise Value to FCFF (EV/FCFF)
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).
An analysis of the cash flow metrics from 2020 to 2024 reveals a period of initial growth followed by a sustained contraction in both operating cash flows and free cash flow to the firm (FCFF). Both indicators reached a peak in 2021 before entering a multi-year downward trajectory.
- Net Cash Provided by Operating Activities
- Operating cash flows increased by approximately 15.1% between 2020 and 2021, rising from 15,865 million to 18,265 million. However, this growth was not sustained, as values declined consecutively over the subsequent three years. By December 31, 2024, operating cash flow fell to 9,107 million, representing a total decrease of approximately 50.1% from the 2021 peak.
- Free Cash Flow to the Firm (FCFF)
- The FCFF closely mirrors the trend of operating cash flows, peaking in 2021 at 17,617 million. A consistent decline is observed from 2022 through 2024, with FCFF dropping to 15,107 million in 2022, 12,206 million in 2023, and ending at 8,496 million in 2024. The aggregate reduction from the 2021 high to the 2024 level constitutes a decline of approximately 51.8%.
- Correlation and Cash Flow Dynamics
- A strong positive correlation exists between net cash provided by operating activities and FCFF throughout the observed period. The narrow variance between these two figures indicates that capital expenditures have remained relatively stable or minimal relative to the scale of operating cash flows. Consequently, the deterioration in FCFF is primarily attributable to the decline in cash generated from operations rather than an increase in capital investment requirements.
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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
= 2,909 × 25.40% = 739
The financial data reveals a fluctuating trend in interest payments net of tax over the five-year period ending December 31, 2024, characterized by an initial decline followed by a significant recovery.
- Interest Paid Trajectory
- Interest payments net of tax experienced a consistent reduction from 2020 to 2022, decreasing from 2,140 million US dollars to a period low of 1,657 million US dollars. This downward trend reversed starting in 2023, with payments rising to 1,811 million US dollars and reaching a five-year peak of 2,170 million US dollars by the end of 2024. The increase from the 2022 trough to the 2024 peak represents a growth of approximately 31% in net interest costs.
- Effective Income Tax Rate Stability
- The effective income tax rate exhibited relative stability throughout the analyzed period, oscillating within a narrow range of 2.1 percentage points. The rate reached a maximum of 26.30% in 2020 and a minimum of 24.20% in 2021, eventually settling at 25.40% in 2024. This consistency indicates a stable tax environment that provided a steady tax shield for interest expenses.
- Net Impact Analysis
- The stability of the effective income tax rate suggests that the observed volatility in interest paid, net of tax, is primarily driven by changes in gross interest expenses rather than fluctuations in tax benefits. The climb to 2,170 million US dollars by 2024 indicates an increase in the cost of debt servicing or an expansion of the total debt load during the latter half of the period.
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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) | 143,303) |
| Free cash flow to the firm (FCFF) | 8,496) |
| Valuation Ratio | |
| EV/FCFF | 16.87 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 24.11 |
| Elevance Health Inc. | 19.90 |
| Intuitive Surgical Inc. | 57.79 |
| Medtronic PLC | 23.66 |
| UnitedHealth Group Inc. | 21.52 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 22.28 |
| EV/FCFF, Industry | |
| Health Care | 31.18 |
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 | 135,154) | 146,035) | 151,066) | 181,495) | 146,595) | |
| Free cash flow to the firm (FCFF)2 | 8,496) | 12,206) | 15,107) | 17,617) | 15,568) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 15.91 | 11.96 | 10.00 | 10.30 | 9.42 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | 35.21 | 36.51 | 23.24 | 23.47 | — | |
| Elevance Health Inc. | 15.57 | 14.19 | 13.32 | 12.74 | — | |
| Intuitive Surgical Inc. | 153.43 | 170.92 | 85.45 | 56.01 | — | |
| Medtronic PLC | 20.58 | 26.54 | 20.32 | 33.84 | — | |
| UnitedHealth Group Inc. | 20.57 | 17.59 | 19.30 | 22.21 | — | |
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | 25.57 | 22.68 | 20.44 | 23.51 | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 24.05 | 25.98 | 18.66 | 17.80 | — | |
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
= 135,154 ÷ 8,496 = 15.91
4 Click competitor name to see calculations.
The financial trajectory between 2020 and 2024 is characterized by a simultaneous contraction in enterprise value and free cash flow to the firm, resulting in a significant expansion of the EV/FCFF multiple. While both valuation and cash flow metrics reached their peak in 2021, the subsequent decline in cash flow generation has occurred at a more rapid pace than the decline in enterprise value, leading to an increase in the valuation multiple over the five-year period.
- Enterprise Value (EV) Trends
- Enterprise value experienced a peak of 181,495 million USD in 2021, representing a significant increase from the 146,595 million USD recorded in 2020. Following this peak, a consistent downward trend is observed, with the value decreasing to 151,066 million USD in 2022, 146,035 million USD in 2023, and reaching a period low of 135,154 million USD by December 31, 2024.
- Free Cash Flow to the Firm (FCFF) Trends
- Free cash flow to the firm followed a similar initial trajectory, peaking in 2021 at 17,617 million USD. However, the subsequent decline was more pronounced than that of the enterprise value. FCFF decreased to 15,107 million USD in 2022, further dropped to 12,206 million USD in 2023, and fell sharply to 8,496 million USD in 2024. This represents a reduction of approximately 51.8% from the 2021 peak to the 2024 year-end value.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio demonstrates a general upward trend, rising from 9.42 in 2020 to 15.91 in 2024. Although the ratio remained relatively stable between 2020 and 2022, it accelerated sharply in 2023 and 2024. This expansion is driven by the disproportionate decline in FCFF relative to the decline in EV. The increase in the ratio suggests that the firm's enterprise value is being supported by a diminishing base of free cash flow, indicating a deterioration in the efficiency of cash flow generation relative to the overall valuation of the business.
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