EMC Corp. (NYSE:EMC)

The financial performance between 2011 and 2015 is characterized by a period of steady expansion followed by a significant contraction. Most profitability metrics experienced growth through 2013, although the peak for operational cash flow indicators occurred slightly later, followed by a universal decline in the final reported year.

EBITDA Growth and Contraction

EBITDA demonstrated a consistent upward trajectory from 2011 to 2014, increasing from US$ 4,841 million to a peak of US$ 5,773 million. This represents a sustained period of operational growth. However, this trend reversed sharply in 2015, with EBITDA falling to US$ 4,953 million, effectively erasing a substantial portion of the gains made over the previous four years.

Operating Profitability and Taxable Income

Earnings before interest and tax (EBIT) and earnings before tax (EBT) peaked in 2013 at US$ 4,021 million and US$ 3,865 million, respectively. A divergence is observed in 2014, where EBITDA continued to rise while EBIT and EBT began a slight decline. By 2015, both metrics experienced a severe reduction, with EBIT dropping to US$ 3,046 million and EBT falling to US$ 2,882 million.

Net Income Volatility

Net income attributable to the corporation followed the pattern of EBT and EBIT, reaching a maximum of US$ 2,889 million in 2013. Following this peak, net income declined for two consecutive years, ending the period at US$ 1,990 million in 2015. This represents the lowest net income value across the entire five-year sequence.

Depreciation and Amortization Analysis

The consistent gap between EBITDA and EBIT suggests significant non-cash expenses. The difference remained relatively stable throughout the period, typically ranging between US$ 1.4 billion and US$ 1.8 billion annually, indicating a heavy asset base or substantial intangible amortization that persisted regardless of the fluctuations in net profitability.

The financial trajectory from 2011 to 2015 is characterized by volatility in Enterprise Value (EV) and a growth-and-contraction cycle in Earnings before interest, tax, depreciation and amortization (EBITDA), which collectively influenced the EV/EBITDA valuation multiple.

Enterprise Value (EV) Trends

Enterprise Value exhibited significant fluctuations over the observed period. A notable decrease occurred between 2011 and 2012, with value dropping from 54,456 million USD to 45,643 million USD. This was followed by a two-year recovery period, reaching a peak of 56,338 million USD in 2014, before declining again to 49,565 million USD by the end of 2015.

EBITDA Performance

Operational earnings demonstrated steady growth for the first four years of the analysis. EBITDA rose from 4,841 million USD in 2011 to a peak of 5,773 million USD in 2014. This growth trend was reversed in 2015, when EBITDA fell to 4,953 million USD, representing a return to earnings levels similar to those recorded in 2011.

EV/EBITDA Ratio Analysis

The EV/EBITDA ratio experienced a sharp compression in 2012, falling from 11.25 to 8.44, a result of decreasing Enterprise Value coupled with increasing EBITDA. From 2013 onward, the ratio entered a consistent upward trend, moving to 8.79 in 2013, 9.76 in 2014, and 10.01 in 2015. The increase in the ratio during 2015 is specifically attributable to the fact that EBITDA declined more significantly than the Enterprise Value during that fiscal year, leading to a higher valuation multiple despite the reduction in overall company value.