Enterprise Value to FCFF (EV/FCFF)
Paying user area
Try for free
Caterpillar Inc. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Current Ratio since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Caterpillar Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Free Cash Flow to The Firm (FCFF)
Caterpillar Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The financial information indicates a notable increase in both net cash provided by operating activities and free cash flow to the firm (FCFF) between 2021 and 2023, followed by a decline in both metrics over the subsequent two years. A detailed examination of these trends is presented below.
- Net Cash from Operations
- Net cash provided by operating activities increased from US$7,198 million in 2021 to US$7,766 million in 2022, representing a modest growth rate. A significant surge occurred in 2023, reaching US$12,885 million. However, this was followed by decreases in 2024 and 2025, settling at US$12,035 million and US$11,739 million respectively. While remaining above the 2021 level, the trend from 2023 to 2025 demonstrates a contraction in cash generated from core business operations.
- Free Cash Flow to the Firm (FCFF)
- FCFF exhibited a similar pattern to net cash from operations. It rose from US$6,716 million in 2021 to US$6,730 million in 2022, indicating relative stability. A substantial increase was observed in 2023, with FCFF reaching US$11,921 million. Subsequently, FCFF decreased to US$10,938 million in 2024 and further to US$9,561 million in 2025. This decline suggests a reduction in the cash available to the firm’s investors after all operating expenses and necessary investments are accounted for.
- Relationship between Operating Cash Flow and FCFF
- The values for FCFF consistently remain below those of net cash provided by operating activities across all reported periods. This is expected, as FCFF is derived from operating cash flow after accounting for capital expenditures and other relevant adjustments. The difference between the two metrics appears relatively stable year-over-year, suggesting consistent investment patterns or a consistent relationship between operating cash flow and required capital expenditures.
- Overall Trend
- The period between 2021 and 2025 demonstrates a cycle of growth followed by contraction. The peak performance in 2023 was not sustained, with both operating cash flow and FCFF experiencing declines in the following two years. Further investigation would be required to determine the underlying causes of these fluctuations, such as changes in revenue, cost structure, investment levels, or working capital management.
Interest Paid, Net of Tax
Caterpillar Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
2 2025 Calculation
Interest paid on short-term and long-term borrowings, tax = Interest paid on short-term and long-term borrowings × EITR
= × =
The analysis reveals a notable increase in interest expense, net of tax, over the five-year period, while the effective income tax rate exhibits fluctuations. A closer examination of these trends provides insights into the company’s financial structure and potential tax planning strategies.
- Interest Expense Trend
- Interest paid on short-term and long-term borrowings, net of tax, demonstrates a consistent upward trajectory. Beginning at US$725 million in 2021, it rose to US$733 million in 2022, representing a modest increase. However, a significant jump is observed in 2023, reaching US$1,347 million, and continues to climb to US$1,396 million in 2024 and stabilizes at US$1,400 million in 2025. This substantial increase suggests either increased borrowing, higher interest rates, or a combination of both. The stabilization in the final year may indicate a plateau in borrowing needs or successful debt management.
- Effective Income Tax Rate (EITR) Trend
- The effective income tax rate experienced variability throughout the period. It increased from 21.20% in 2021 to 23.60% in 2022, potentially due to changes in the tax code or the geographic distribution of profits. A decrease to 21.30% in 2023 was followed by a further decline to 19.70% in 2024. The rate then increased again in 2025, reaching 24.00%. These fluctuations could be attributed to tax planning strategies, changes in the mix of taxable income, or the impact of tax credits and deductions. The increase in 2025 warrants further investigation to determine the underlying cause.
- Relationship between Interest Expense and EITR
- While interest expense increased significantly, the effective income tax rate did not consistently move in the same direction. The net-of-tax presentation of interest expense suggests that tax shields related to interest deductibility are being utilized. However, the fluctuations in the EITR indicate that the benefit of these tax shields may be varying due to other factors influencing the company’s overall tax liability. The substantial rise in interest expense, coupled with the EITR changes, suggests a complex interplay between financing decisions and tax management.
Further investigation into the company’s debt structure, interest rate exposure, and tax planning activities is recommended to fully understand the drivers behind these observed trends.
Enterprise Value to FCFF Ratio, Current
Caterpillar Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | |
| Eaton Corp. plc | |
| GE Aerospace | |
| Honeywell International Inc. | |
| Lockheed Martin Corp. | |
| RTX Corp. | |
| EV/FCFF, Sector | |
| Capital Goods | |
| EV/FCFF, Industry | |
| Industrials | |
Based on: 10-K (reporting date: 2025-12-31).
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
Caterpillar Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| EV/FCFF, Sector | ||||||
| Capital Goods | ||||||
| EV/FCFF, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
3 2025 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibits considerable fluctuation over the observed period. Enterprise Value increased consistently from 2021 to 2023, then experienced a moderate increase in 2024, followed by a substantial rise in 2025. Free Cash Flow to the Firm (FCFF) demonstrated an initial period of stability between 2021 and 2022, followed by a significant increase in 2023, and then a decline in both 2024 and 2025.
- EV/FCFF Ratio Trend
- The EV/FCFF ratio began at 20.50 in 2021, increasing to 23.54 in 2022. A notable decrease was observed in 2023, with the ratio falling to 16.08. This downward trend was short-lived, as the ratio increased to 18.32 in 2024. The most significant change occurred in 2025, with the EV/FCFF ratio rising sharply to 41.17.
The increase in the EV/FCFF ratio in 2025 is primarily driven by the substantial increase in Enterprise Value, coupled with a concurrent decrease in Free Cash Flow to the Firm. The earlier decrease in the ratio in 2023 was a result of FCFF increasing at a faster rate than Enterprise Value. The relative stability of the ratio between 2021 and 2024 suggests a period of balanced growth between the company’s valuation and its cash flow generation. However, the 2025 figures indicate a potential shift in investor perception, possibly reflecting increased optimism about future growth prospects or a change in risk assessment, leading to a higher valuation relative to current free cash flow.
- Enterprise Value
- Enterprise Value increased from US$137,695 million in 2021 to US$393,575 million in 2025. The largest single-year increase occurred between 2024 and 2025.
- Free Cash Flow to the Firm
- Free Cash Flow to the Firm increased from US$6,716 million in 2021 to US$11,921 million in 2023, before declining to US$9,561 million in 2025. The period between 2024 and 2025 shows a decrease in FCFF.
The diverging trends in Enterprise Value and Free Cash Flow to the Firm in 2025 warrant further investigation to understand the underlying drivers of these changes and their potential implications for the company’s future performance.