Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Colgate-Palmolive Co., FCFF calculation
US$ in millions
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).
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The financial trajectory from 2018 to 2022 is characterized by an initial period of growth followed by a significant contraction in cash generation. Both net cash provided by operations and free cash flow to the firm (FCFF) reached a peak in 2020 before experiencing a consecutive two-year decline.
- Net Cash Provided by Operations
- Operating cash flows demonstrated steady growth between 2018 and 2020, rising from US$ 3,056 million to a peak of US$ 3,719 million. A reversal occurred in 2021, with values dropping to US$ 3,325 million, and continuing downward to US$ 2,556 million by the end of 2022. This represents a cumulative decrease of approximately 31% from the 2020 peak.
- Free Cash Flow to the Firm (FCFF)
- FCFF mirrored the overall trend of operating cash flows but exhibited greater volatility. After increasing from US$ 2,769 million in 2018 to US$ 3,457 million in 2020, FCFF declined to US$ 2,907 million in 2021 and further to US$ 1,975 million in 2022. The contraction from the 2020 peak to 2022 is approximately 43%, which is more severe than the decline observed in operating cash flows.
- Capital Expenditure Impact
- The widening divergence between net cash provided by operations and FCFF suggests an increase in capital expenditures. In 2018, the difference between these two metrics was US$ 287 million; by 2022, this gap expanded to US$ 581 million. This indicates that the erosion of FCFF in the final two years of the period was driven by a combination of reduced operating cash inflows and an increase in capital investments.
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Interest Paid, Net of Tax
Colgate-Palmolive Co., interest paid, net of tax calculation
US$ in millions
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).
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
The financial analysis of interest obligations and tax rates between 2018 and 2022 reveals a period of relative stability followed by a notable reduction in net interest expenditures in the final year. While the costs associated with interest paid remained consistent for the majority of the period, there was a simultaneous upward trend in the effective income tax rate during the latter years.
- Interest Paid, Net of Tax
- Between 2018 and 2021, net interest payments exhibited minimal variance, fluctuating within a narrow range between 142 million and 148 million US dollars. A significant shift occurred in 2022, where interest paid, net of tax, declined to 112 million US dollars, representing a 23.8% decrease relative to the 2021 level.
- Effective Income Tax Rate (EITR)
- The EITR demonstrated a non-linear trend, initially decreasing from 23.90% in 2018 to a period low of 21.60% in 2020. Subsequently, the rate entered a growth phase, rising to 24.30% in 2021 and reaching a period peak of 26.10% in 2022.
- Interest Capitalized, Net of Tax
- Capitalized interest remained low throughout the five-year period, oscillating between 1 million and 2 million US dollars from 2018 to 2021. In 2022, this figure doubled to 4 million US dollars, marking the highest level of capitalized interest within the observed timeframe.
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Enterprise Value to FCFF Ratio, Current
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. | 25.24 |
| EV/FCFF, Industry | |
| Consumer Staples | 46.14 |
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.
Enterprise Value to FCFF Ratio, Historical
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 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Consumer Staples | 30.06 | 20.91 | — | — | — | |
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).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 68,823 ÷ 1,975 = 34.84
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a period of relative valuation stability followed by a significant expansion in the Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) multiple. The most notable trend is the divergence between the company's overall valuation and its cash flow generation capacity in the final year of the period.
- Enterprise Value Trends
- Enterprise value experienced an initial growth phase, rising from 63,413 million in 2018 to a peak of 73,870 million in 2020. This was followed by a period of stabilization in 2021 and a subsequent contraction to 68,823 million by December 31, 2022.
- Free Cash Flow to the Firm (FCFF) Dynamics
- FCFF demonstrated an upward trend from 2018 to 2020, reaching a maximum of 3,457 million. A reversal occurred after 2020, with a decline to 2,907 million in 2021 and a sharp contraction to 1,975 million in 2022, representing a significant reduction in cash generation efficiency.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio remained comparatively stable from 2018 to 2021, fluctuating between 21.37 and 25.21. However, the ratio increased sharply to 34.84 in 2022. This expansion is primarily driven by the substantial decrease in FCFF rather than a surge in enterprise value; the rate of cash flow decline significantly outpaced the decrease in the company's enterprise value, leading to a higher valuation multiple.
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