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Caterpillar Inc. (NYSE:CAT)

Enterprise Value to FCFF (EV/FCFF)

Intermediate level

Free Cash Flow to The Firm (FCFF)

Caterpillar Inc., FCFF calculation

US$ in millions

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12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Profit (loss) attributable to common stockholders 6,093  6,147  754  (67) 2,102 
Profit attributable to noncontrolling interests 1  1  5  8  11 
Net noncash charges 3,748  4,487  5,137  5,039  3,554 
Changes in assets and liabilities, net of acquisitions and divestitures (2,930) (4,077) (194) 628  1,008 
Net cash provided by operating activities 6,912  6,558  5,702  5,608  6,675 
Interest paid on short-term and long-term borrowings, net of tax1 820  830  371  699  775 
Capital expenditures, excluding equipment leased to others (1,056) (1,276) (898) (1,109) (1,388)
Expenditures for equipment leased to others (1,613) (1,640) (1,438) (1,819) (1,873)
Proceeds from disposals of leased assets and property, plant and equipment 1,153  936  1,164  899  760 
Free cash flow to the firm (FCFF) 6,216  5,408  4,901  4,278  4,949 

Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).

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Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Caterpillar Inc.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Caterpillar Inc.’s FCFF increased from 2017 to 2018 and from 2018 to 2019.

Interest Paid, Net of Tax

Caterpillar Inc., interest paid, net of tax calculation

US$ in millions

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12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Effective Income Tax Rate (EITR)
EITR1 22.40% 23.70% 67.20% 35.00% 26.00%
Interest Paid, Net of Tax
Interest paid on short-term and long-term borrowings, before tax 1,057  1,088  1,131  1,075  1,047 
Less: Interest paid on short-term and long-term borrowings, tax2 237  258  760  376  272 
Interest paid on short-term and long-term borrowings, net of tax 820  830  371  699  775 

Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).

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2 2019 Calculation
Interest paid on short-term and long-term borrowings, tax = Interest paid on short-term and long-term borrowings × EITR
= 1,057 × 22.40% = 237

Enterprise Value to FCFF Ratio, Current

Caterpillar Inc., current EV/FCFF calculation, comparison to benchmarks

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Selected Financial Data (US$ in millions)
Enterprise value (EV) 96,247 
Free cash flow to the firm (FCFF) 6,216 
Valuation Ratio
EV/FCFF 15.48
Benchmarks
EV/FCFF, Competitors1
Illinois Tool Works Inc. 21.02
EV/FCFF, Sector
Industrial Engineering 17.23
EV/FCFF, Industry
Industrials 19.82

Based on: 10-K (filing date: 2020-02-19).

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

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Enterprise value (EV)1 104,698  105,065  122,294  87,765  69,682 
Free cash flow to the firm (FCFF)2 6,216  5,408  4,901  4,278  4,949 
Valuation Ratio
EV/FCFF3 16.84 19.43 24.95 20.52 14.08
Benchmarks
EV/FCFF, Competitors4
Illinois Tool Works Inc. 22.93 20.00 26.64 22.67 17.28
EV/FCFF, Sector
Industrial Engineering 18.76 19.57 25.81 21.28 15.10
EV/FCFF, Industry
Industrials 24.02 21.77 23.72 23.00 19.52

Based on: 10-K (filing date: 2020-02-19), 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16).

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3 2019 Calculation
EV/FCFF = EV ÷ FCFF
= 104,698 ÷ 6,216 = 16.84

4 Click competitor name to see calculations.

Valuation ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Caterpillar Inc.’s EV/FCFF ratio decreased from 2017 to 2018 and from 2018 to 2019.