Enterprise Value to FCFF (EV/FCFF)
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Free Cash Flow to The Firm (FCFF)
Caterpillar Inc., 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).
- Net Cash Provided by Operating Activities
- There is a consistent upward trend in net cash provided by operating activities from 2020 to 2023, increasing from 6,327 million US dollars to a peak of 12,885 million US dollars in 2023. However, in 2024, there is a slight decline to 12,035 million US dollars, still maintaining a level substantially higher than the initial years. This indicates improving operational cash generation capacity over the period, with a minor contraction in the latest year.
- Free Cash Flow to the Firm (FCFF)
- The FCFF values follow a similar rising trend from 2020 through 2023, climbing from 5,799 million US dollars to 11,921 million US dollars, reflecting enhanced cash flow available to all capital providers. In 2024, FCFF decreases to 10,938 million US dollars, mirroring the slight reduction observed in operating cash flow. This downward adjustment in the most recent year might suggest higher capital expenditures or other adjustments impacting free cash flow despite strong operational cash flow.
- Overall Financial Cash Flows Analysis
- Both key cash flow metrics demonstrate significant growth from 2020 through 2023, evidencing strengthening cash generation and efficient capital allocation. The marginal decline in 2024 signals a potential shift in cash flow dynamics that warrants monitoring but does not negate the overall positive progression observed. This pattern suggests a generally healthy financial performance with robust liquidity and operational efficiency improvements over the analyzed period.
Interest Paid, Net of Tax
Caterpillar Inc., 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 on short-term and long-term borrowings, tax = Interest paid on short-term and long-term borrowings × EITR
= × =
- Effective Income Tax Rate (EITR) Trend
- The effective income tax rate exhibited a declining trend over the five-year period. Starting at 25.2% in 2020, it decreased to 21.2% in 2021, slightly increased to 23.6% in 2022, and then resumed a downward trajectory reaching 19.7% by 2024. This overall decline suggests improved tax efficiency or changes in tax regulations and strategies reducing the company's tax burden.
- Interest Paid on Borrowings (Net of Tax) Trend
- Interest payments on short-term and long-term borrowings, net of tax, showed fluctuations and a significant increase in the later years. Initial values were moderately high with $815 million in 2020, followed by a slight decrease to $725 million in 2021 and a marginal rise to $733 million in 2022. However, there was a sharp increase in 2023 to $1,347 million and a further slight increase to $1,396 million in 2024. This sharp rise in interest expenses may indicate increased borrowing, higher interest rates, or a larger proportion of debt financing during the latter period.
- Overall Insights
- The combination of a declining effective tax rate and increased interest expenses suggests a strategic financial shift. While the company effectively reduced its tax liabilities, potentially enhancing net profits, the rise in interest payments may be a sign of leveraging or refinancing activities. Management should consider the sustainability of increasing debt service costs alongside the benefits gained from tax optimizations.
Enterprise Value to FCFF Ratio, Current
Caterpillar Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ 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: 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
Caterpillar Inc., 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 | ||||||
| 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: 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.
- Enterprise Value (EV)
- The enterprise value exhibited an overall increasing trend over the five-year span. Starting at approximately 138 billion US dollars at the end of 2020, it slightly decreased in 2021 but then rose steadily through 2022, 2023, and 2024, reaching around 200 billion US dollars by the end of 2024. This denotes an expansion in the firm's market valuation and total capital employed over time.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm showed a consistent upward trend from 2020 through 2023, starting at nearly 5.8 billion US dollars and peaking at about 11.9 billion US dollars in 2023. Although there is a slight decline in 2024 to approximately 10.9 billion US dollars, the FCFF remains significantly higher than the initial year, indicating improved cash generation capability overall during the period analyzed.
- EV/FCFF Ratio
- The EV/FCFF ratio fluctuated throughout the years. It began at a relatively high level of 23.83 in 2020, decreased to 20.5 in 2021, rose back to 23.54 in 2022, and then fell notably to 16.08 in 2023 before slightly increasing again to 18.32 in 2024. The downward movements in this ratio in the later years suggest that the enterprise value growth was somewhat moderate compared to the notable increase in free cash flow, potentially implying improved valuation efficiency or better cash flow performance in relation to the company's capital base.