Enterprise Value to FCFF (EV/FCFF)
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Free Cash Flow to The Firm (FCFF)
Cummins Inc., FCFF calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1, 2 See details »
The analysis of the company's cash flow data over the five-year period reveals notable trends in both operating cash flow and free cash flow to the firm (FCFF).
- Net Cash Provided by Operating Activities
- There is a clear downward trend from 2019 through 2022, with operating cash flow decreasing from $3,181 million in 2019 to a low of $1,962 million in 2022. This represents an overall decline of approximately 38% over the four-year span. However, in 2023, there is a significant rebound to $3,966 million, marking a substantial increase of over 100% compared to the previous year and reaching the highest level in the observed period.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm follows a similar pattern to operating cash flow, declining consistently each year from $2,566 million in 2019 to $1,163 million in 2022. This reflects a decrease of nearly 55% over the same period. In 2023, FCFF reverses the downward trend, rising sharply to $2,938 million, which highlights a recovery but still remains below the 2019 value.
The concurrent declines in both operating cash flow and FCFF from 2019 to 2022 suggest a period of financial strain or increased investment that consumed cash. The sharp recovery in 2023 indicates a positive turnaround in operational efficiency or cash generation capacity. The increase in operating cash flow outpaces that of FCFF in 2023, which may imply changes in capital expenditures or working capital requirements affecting free cash flow.
Overall, the data indicate a challenging phase from 2020 through 2022, followed by a robust improvement in 2023, demonstrating the company's ability to enhance cash generation after a period of contraction.
Interest Paid, Net of Tax
Cummins Inc., interest paid, net of tax calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
2 2023 Calculation
Cash payments for interest, net of capitalized interest, tax = Cash payments for interest, net of capitalized interest × EITR
= × =
3 2023 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited a generally stable trend from 2019 through 2022, fluctuating between 20% and 22.6%. However, a significant increase is observed in 2023, with the rate more than doubling to 48.3%, indicating a substantial rise in tax expense relative to earnings during that year.
- Cash Payments for Interest, Net of Capitalized Interest, Net of Tax
- Cash payments for interest have increased steadily over the five-year period. Beginning at $87 million in 2019, there was a minor decrease to $68 million in 2020, followed by a return to $87 million in 2021. A notable upward trend is observed in 2022 and 2023, with payments rising to $142 million and $193 million respectively. This suggests an increasing cost of borrowing or increased debt levels over time.
- Interest Capitalized, Net of Tax
- The amount of interest capitalized, net of tax, remained constant at $2 million for 2019 through 2021, then doubled to $4 million in 2022 and maintained at this level in 2023. This increase indicates a rising portion of interest costs being capitalized, potentially linked to increased investment in capital projects or assets.
Enterprise Value to FCFF Ratio, Current
Cummins Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | |
| Caterpillar Inc. | |
| 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: 2023-12-31).
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
Cummins Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| 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. | ||||||
| Caterpillar Inc. | ||||||
| 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: 2023-12-31), 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).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- Over the five-year period, the enterprise value exhibited a general upward trend with some fluctuations. It increased significantly from 26,544 million USD at the end of 2019 to 37,421 million USD by the end of 2020. The EV then decreased to 33,733 million USD in 2021 before rising again to reach 41,393 million USD in 2022. The value stabilized around this level in 2023, with a slight increase to 41,445 million USD. This pattern suggests variability in market valuation but overall growth in enterprise value.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm showed a declining trend from 2019 through 2022. It started at 2,566 million USD in 2019 and decreased each year, reaching a low of 1,163 million USD in 2022. However, a strong recovery occurred in 2023, with FCFF rising sharply to 2,938 million USD, surpassing the initial 2019 level. This rebound indicates an improvement in the firm’s ability to generate cash flow from operations after a period of decline.
- EV/FCFF Ratio
- The EV to FCFF ratio displayed considerable volatility during the review period. Initially, it was 10.35 at the end of 2019, increasing significantly in subsequent years to peak at 35.58 in 2022. This escalation primarily resulted from declining FCFF alongside rising enterprise value, reflecting potentially higher valuation multiples or stress on cash flow generation. In 2023, the ratio declined sharply to 14.1, driven by the strong recovery in free cash flow while the enterprise value remained stable. This ratio adjustment suggests a normalization or improved alignment between valuation and cash flow generation capacity.