Colgate-Palmolive Co., FCFF calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to Colgate-Palmolive Company	1,785)	2,166)	2,695)	2,367)	2,400)
Net income attributable to noncontrolling interests	182)	172)	165)	160)	158)
Net noncash charges	1,315)	1,184)	478)	541)	653)
Cash effects of changes in assets and liabilities	(726)	(197)	381)	65)	(155)
Net cash provided by operations	2,556)	3,325)	3,719)	3,133)	3,056)
Interest paid, net of tax¹	112)	147)	147)	142)	148)
Interest capitalized, net of tax²	4)	2)	1)	1)	2)
Capital expenditures	(696)	(567)	(410)	(335)	(436)
Free cash flow to the firm (FCFF)	1,975)	2,907)	3,457)	2,940)	2,769)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

^{1, 2} See details »

Net Cash Provided by Operations: The net cash provided by operations exhibited an overall positive trend from 2018 through 2020, increasing from 3,056 million USD in 2018 to a peak of 3,719 million USD in 2020. This growth indicates improving operating efficiency and cash generation ability during that period. However, a decline followed in the subsequent years, with the cash flow decreasing to 3,325 million USD in 2021 and further dropping to 2,556 million USD in 2022. The decline in the last two years may reflect challenges in operational performance or increased working capital requirements.
Free Cash Flow to the Firm (FCFF): Free cash flow to the firm also demonstrated a rising trend between 2018 and 2020, moving from 2,769 million USD up to 3,457 million USD. This suggests that the firm was generating increasing amounts of cash available for distribution to stakeholders or reinvestment. Nonetheless, similarly to net cash from operations, FCFF declined noticeably in 2021 and 2022, with values of 2,907 million USD and 1,975 million USD respectively. The reduction in free cash flow indicates either increased capital expenditures, operational headwinds, or both, which impacted the liquidity available to the firm.
Overall Analysis: The pattern across both metrics highlights a phase of strong cash generation up to 2020, followed by a notable downturn in the succeeding years. The synchronous drop in both operating cash flow and free cash flow suggests that the firm may have encountered operational difficulties or increased cash outflows related to investing activities after 2020. This trend warrants attention to factors influencing cash conversion and capital management to understand the underlying causes of the decreased cash flows in 2021 and 2022.

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Colgate-Palmolive Co., interest paid, net of tax calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Effective Income Tax Rate (EITR)
EITR¹	26.10%	24.30%	21.60%	23.40%	23.90%
Interest Paid, Net of Tax
Interest paid, before tax	151)	194)	188)	185)	194)
Less: Interest paid, tax²	39)	47)	41)	43)	46)
Interest paid, net of tax	112)	147)	147)	142)	148)
Interest Costs Capitalized, Net of Tax
Interest capitalized, before tax	5)	3)	1)	1)	2)
Less: Interest capitalized, tax³	1)	1)	—)	—)	—)
Interest capitalized, net of tax	4)	2)	1)	1)	2)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ See details »

² 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 151 × 26.10% = 39

³ 2022 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 5 × 26.10% = 1

Effective Income Tax Rate (EITR): The effective income tax rate showed a generally increasing trend over the five-year period. Beginning at 23.9% in 2018, the rate decreased slightly to 21.6% by 2020, indicating some tax advantages or favorable conditions during that time. From 2020 onward, the rate increased each year, reaching 26.1% in 2022. This upward movement suggests a higher tax burden in the most recent years, which could result from changes in tax regulations, reduced deductions, or shifts in the company's income composition.
Interest Paid, Net of Tax: Interest paid, net of tax, remained relatively stable from 2018 to 2021, fluctuating mildly between $142 million and $148 million. However, in 2022, there was a notable decline to $112 million, representing a reduction of approximately 24% compared to the prior year. This decrease could reflect lower outstanding debt, refinancing at more favorable rates, or changes in debt structure.
Interest Capitalized, Net of Tax: The amount of interest capitalized, net of tax, remained minimal but showed a slight increase over the period. Starting at $2 million in 2018, it dropped to $1 million in both 2019 and 2020, then increased to $2 million in 2021, and doubled to $4 million in 2022. This pattern suggests a modest rise in capital expenditures or projects requiring capitalization of interest in the latest years.

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Colgate-Palmolive Co., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in millions)
Enterprise value (EV)	70,910)
Free cash flow to the firm (FCFF)	1,975)
Valuation Ratio
EV/FCFF	35.90
Benchmarks
EV/FCFF, Competitors¹
Procter & Gamble Co.	23.24
EV/FCFF, Industry
Consumer Staples	41.26

Based on: 10-K (reporting date: 2022-12-31).

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.

Colgate-Palmolive Co., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in millions)
Enterprise value (EV)¹	68,823)	73,300)	73,870)	72,618)	63,413)
Free cash flow to the firm (FCFF)²	1,975)	2,907)	3,457)	2,940)	2,769)
Valuation Ratio
EV/FCFF³	34.84	25.21	21.37	24.70	22.90
Benchmarks
EV/FCFF, Competitors⁴
Procter & Gamble Co.	26.63	22.86	23.81	25.13	—
EV/FCFF, Industry
Consumer Staples	30.41	20.99	23.37	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ See details »

² See details »

³ 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 68,823 ÷ 1,975 = 34.84

⁴ Click competitor name to see calculations.

Enterprise Value (EV): The enterprise value showed an overall increasing trend from 2018 to 2020, rising from $63,413 million to $73,870 million. However, this was followed by a slight decrease in 2021 to $73,300 million, and a more notable decline in 2022 to $68,823 million. This indicates that the market valuation of the company peaked around 2020 before experiencing a downward adjustment in the subsequent two years.
Free Cash Flow to the Firm (FCFF): Free cash flow exhibited growth initially, increasing from $2,769 million in 2018 to a high of $3,457 million in 2020. After this peak, FCFF declined to $2,907 million in 2021 and further decreased sharply to $1,975 million in 2022. This pattern suggests a reduction in the company’s cash generation capacity relative to prior years, particularly significant in the last reported year.
EV/FCFF Ratio: The ratio of enterprise value to free cash flow progressively increased from 22.9 in 2018 to 25.21 in 2021, indicating that the valuation relative to cash flow was rising over this period. There was a marked spike in 2022, where the ratio jumped to 34.84, reflecting a substantial increase in enterprise value relative to cash flow or a considerable decline in FCFF relative to the company’s valuation. This elevated ratio could imply that the market valuation might be less supported by cash flow fundamentals in the most recent year.

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Colgate-Palmolive Co. (NYSE:CL)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical