Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
EQT Corp., FCFF calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
An analysis of the financial performance from 2017 to 2021 reveals a marked transition in the company's ability to generate free cash flow to the firm. Although net cash provided by operating activities remained positive throughout the five-year period, the free cash flow to the firm underwent a structural shift from negative values to consistent growth.
- Operating Cash Flow Volatility
- Net cash provided by operating activities peaked in 2018 at approximately 2.98 billion US dollars. This was followed by a decline in 2019 and 2020, with a slight recovery to 1.66 billion US dollars by the end of 2021.
- Free Cash Flow to the Firm Trajectory
- FCFF exhibited a strong recovery trend, moving from a deficit of 128 million US dollars in 2017 and a peak deficit of 554 million US dollars in 2018 to a positive 401 million US dollars in 2019. This growth continued steadily, reaching 811 million US dollars by 2021.
- Capital Expenditure Implications
- A notable divergence occurred in 2018, where the highest operating cash flow of the period coincided with the lowest FCFF, indicating a period of significant capital investment. Conversely, the trend from 2019 to 2021 shows FCFF increasing even while operating cash flows remained below 2018 levels, suggesting a shift toward improved capital discipline and enhanced cash conversion.
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Interest Paid, Net of Tax
EQT Corp., interest paid, net of tax calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
2 2021 Calculation
Cash paid during the year for interest, net of amount capitalized, tax = Cash paid during the year for interest, net of amount capitalized × EITR
= 280,511 × 27.30% = 76,580
The financial data reflects a period of volatility in net cash outflows for interest payments coupled with a consistent upward trajectory in the effective income tax rate between 2017 and 2021.
- Effective Income Tax Rate (EITR) Trends
- A significant increase in the EITR is observed between 2017 and 2018, where the rate rose from 8.40% to 22.80%. Following this initial jump, the rate maintained a steady upward climb, reaching 23.50% in 2019, 23.60% in 2020, and peaking at 27.30% by the end of 2021.
- Net Cash Interest Outflows
- Cash paid for interest, net of capitalization and tax, exhibited a fluctuating pattern over the five-year period. Outflows increased from $173.5 million in 2017 to $201.5 million in 2018, followed by a two-year decline that reached a period low of $149.5 million in 2020. This downward trend reversed sharply in 2021, with net interest payments rising to $203.9 million, the highest level recorded in the analyzed timeframe.
- Analysis of Tax Shield Impact
- The rising EITR typically enhances the tax deductibility of interest expenses, which would theoretically reduce the net cash impact of interest payments. However, the sharp increase in net cash paid during 2021, coinciding with the highest recorded tax rate of 27.30%, indicates a substantial increase in gross interest obligations that exceeded the mitigating effects of the higher tax shield.
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Enterprise Value to FCFF Ratio, Current
EQT Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 19,738,773) |
| Free cash flow to the firm (FCFF) | 811,251) |
| Valuation Ratio | |
| EV/FCFF | 24.33 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Chevron Corp. | 25.68 |
| ConocoPhillips | 21.27 |
| Exxon Mobil Corp. | 28.16 |
| EV/FCFF, Sector | |
| Oil, Gas & Consumable Fuels | 18.33 |
| EV/FCFF, Industry | |
| Energy | 18.67 |
Based on: 10-K (reporting date: 2021-12-31).
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
EQT Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 13,535,699) | 10,260,386) | 6,662,726) | 10,130,562) | 25,173,003) | |
| Free cash flow to the firm (FCFF)2 | 811,251) | 644,970) | 401,150) | (554,048) | (128,040) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 16.68 | 15.91 | 16.61 | — | — | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Chevron Corp. | 13.33 | — | — | — | — | |
| ConocoPhillips | 10.72 | — | — | — | — | |
| Exxon Mobil Corp. | 10.06 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Oil, Gas & Consumable Fuels | 11.15 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Energy | 11.54 | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
3 2021 Calculation
EV/FCFF = EV ÷ FCFF
= 13,535,699 ÷ 811,251 = 16.68
4 Click competitor name to see calculations.
Between 2017 and 2021, a significant transformation in the financial profile is observed, characterized by a shift from negative free cash flow to a period of steady growth and enterprise value recovery.
- Enterprise Value (EV) Volatility
- Enterprise value experienced a sharp contraction between 2017 and 2019, falling from approximately 25.17 billion USD to a low of 6.66 billion USD. This downward trend reversed in 2020, initiating a recovery phase that saw the value climb to 13.54 billion USD by the end of 2021.
- Free Cash Flow to the Firm (FCFF) Transition
- The company operated with negative FCFF during 2017 and 2018, with cash outflows deepening to 554 million USD in 2018. A fundamental shift occurred in 2019 when FCFF turned positive at 401 million USD. This positive momentum continued consistently through 2021, with FCFF increasing to 811 million USD, representing a sustained improvement in cash generation capabilities.
- EV/FCFF Ratio Stability
- The EV/FCFF ratio became applicable in 2019 following the transition to positive cash flow. From 2019 to 2021, the ratio remained remarkably stable, fluctuating within a narrow band between 15.91 and 16.68. This stability suggests that the growth in enterprise value since 2019 has occurred in proportional alignment with the growth in free cash flow, maintaining a consistent valuation multiple.
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