Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
EMC Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
A parabolic trend is observed in both net cash provided by operating activities and free cash flow to the firm (FCFF) over the five-year period ending December 31, 2015. Both metrics experienced steady growth through 2013 before entering a period of contraction that brought values below the 2011 baseline by the end of the period.
- Net Cash Provided by Operating Activities
- Operating cash flow exhibited a growth phase from 2011 to 2013, rising from US$ 5,669 million to a peak of US$ 6,923 million. This growth was reversed in the subsequent two years, with a decline to US$ 6,523 million in 2014 and a further drop to US$ 5,386 million by the end of 2015, representing a 22.6% decrease from the 2013 peak.
- Free Cash Flow to the Firm (FCFF)
- FCFF mirrored the trajectory of operating activities, increasing from US$ 4,481 million in 2011 to a peak of US$ 5,592 million in 2013. A downward trend followed, resulting in a final value of US$ 4,021 million in 2015. The overall decline from the peak in 2013 to the end of 2015 amounted to approximately 28.1%.
- Cash Flow Conversion and Capital Expenditure Trends
- The variance between net cash provided by operating activities and FCFF remained relatively stable across the period, ranging from US$ 1,188 million in 2011 to US$ 1,385 million in 2014. This indicates that while operational cash generation fluctuated significantly, the company maintained a consistent level of capital expenditure and investment relative to its cash flow production.
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Interest Paid, Net of Tax
EMC Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
2 2015 Calculation
Interest paid, tax = Interest paid × EITR
= 138 × 24.60% = 34
The net-of-tax interest payments exhibited significant volatility between 2011 and 2015, characterized by an initial sharp decline followed by a sustained period of growth. The overall trajectory indicates a substantial increase in the after-tax cost of servicing debt toward the end of the analyzed period.
- Interest Payment Trends
- A notable decrease occurred between 2011 and 2012, with payments dropping from $56 million to $25 million. This trend reversed sharply in 2013, as payments rose to $77 million. The upward momentum continued through 2014 and 2015, peaking at $104 million, which represents a 316% increase from the 2012 low.
- Effective Income Tax Rate (EITR) Dynamics
- The EITR fluctuated between a low of 19.7% in 2011 and a high of 24.6% in 2015. While the rate remained relatively stable, it trended generally upward in the final two years of the period. Because interest is reported net of tax, these fluctuations influence the final figure by altering the value of the tax shield associated with interest expenses.
- Analysis of Net Cost Servicing
- The substantial growth in net interest paid from 2013 to 2015 suggests that increases in gross interest obligations—likely driven by higher debt levels or rising interest rates—far outweighed any impact from the fluctuating EITR. The narrow variance between 2014 ($103 million) and 2015 ($104 million) suggests a stabilization of the net cost of debt during this timeframe.
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Enterprise Value to FCFF Ratio, Current
EMC Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 54,750) |
| Free cash flow to the firm (FCFF) | 4,021) |
| Valuation Ratio | |
| EV/FCFF | 13.62 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Advanced Micro Devices Inc. | 116.77 |
| Analog Devices Inc. | 39.52 |
| Applied Materials Inc. | 42.76 |
| Broadcom Inc. | 49.63 |
| Intel Corp. | — |
| KLA Corp. | 42.41 |
| Lam Research Corp. | 45.72 |
| Marvell Technology Inc. | 75.52 |
| Micron Technology Inc. | 11.85 |
| NVIDIA Corp. | 44.61 |
| Qualcomm Inc. | 12.79 |
| Texas Instruments Inc. | 85.27 |
Based on: 10-K (reporting date: 2015-12-31).
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
EMC Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 49,565) | 56,338) | 49,998) | 45,643) | 54,456) | |
| Free cash flow to the firm (FCFF)2 | 4,021) | 5,138) | 5,592) | 5,049) | 4,481) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 12.33 | 10.96 | 8.94 | 9.04 | 12.15 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
3 2015 Calculation
EV/FCFF = EV ÷ FCFF
= 49,565 ÷ 4,021 = 12.33
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio experienced a U-shaped trajectory over the five-year period from 2011 to 2015, characterized by an initial compression followed by a steady expansion.
- Enterprise Value Trends
- Enterprise value exhibited volatility, starting at 54,456 million USD in 2011 and declining to 45,643 million USD in 2012. A subsequent recovery occurred over the next two years, reaching a peak of 56,338 million USD in 2014, before receding to 49,565 million USD by the end of 2015.
- Free Cash Flow to the Firm (FCFF) Trends
- FCFF showed a period of growth from 2011 to 2013, rising from 4,481 million USD to a peak of 5,592 million USD. However, a downward trend emerged in the latter part of the period, with cash flow decreasing to 5,138 million USD in 2014 and further dropping to 4,021 million USD in 2015.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio decreased from 12.15 in 2011 to a low of 8.94 in 2013. This compression was driven by the simultaneous increase in FCFF and a relatively lower enterprise value. Conversely, from 2014 to 2015, the ratio increased to 12.33, reflecting a significant contraction in FCFF and fluctuations in enterprise value, resulting in a higher valuation multiple relative to the cash generated by the firm.
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