Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Eaton Corp. plc, FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The financial information indicates a consistent upward trend in both net cash provided by operating activities and free cash flow to the firm (FCFF) over the five-year period. Both metrics demonstrate growth from 2021 to 2025, suggesting improving financial health and increasing cash generation capabilities.
- Net Cash from Operations
- Net cash provided by operating activities increased from US$2,163 million in 2021 to US$4,472 million in 2025. This represents a substantial increase, indicating improved operational efficiency and profitability. The growth was particularly pronounced between 2022 and 2023, with a significant jump in cash generation. The rate of increase slowed somewhat between 2023 and 2025, but remained positive.
- Free Cash Flow to the Firm (FCFF)
- FCFF followed a similar trajectory, rising from US$1,771 million in 2021 to US$3,918 million in 2025. This positive trend suggests the company is generating increasing amounts of cash available to all investors, including both debt and equity holders. Like net cash from operations, the largest increase in FCFF occurred between 2022 and 2023. The growth rate also moderated between 2023 and 2025, but remained positive.
The consistent growth in FCFF, mirroring the increase in operating cash flow, suggests that the company’s core business is performing well and effectively converting revenue into cash. The relatively stable growth rate in the most recent two years may indicate a maturing phase of growth, or potentially the impact of larger capital expenditures not explicitly shown in this information. Further investigation into the components of operating cash flow and capital expenditures would provide a more comprehensive understanding of these trends.
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Interest Paid, Net of Tax
Eaton Corp. plc, interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2 2025 Calculation
Interest paid on debt, tax = Interest paid on debt × EITR
= 351 × 17.10% = 60
The amount of interest paid, net of tax, exhibits a consistent upward trend over the five-year period. Simultaneously, the effective income tax rate demonstrates volatility but generally trends upward. An examination of these figures reveals potential implications for the company’s financial performance and capital structure.
- Interest Paid, Net of Tax
- Interest paid, net of tax, increased from US$153 million in 2021 to US$291 million in 2025. This represents a cumulative increase of approximately 90.2%. The growth rate decelerated slightly between 2022 and 2023 (US$57 million) compared to the initial increase between 2021 and 2022 (US$59 million), but remained relatively stable in subsequent periods. This suggests a continued reliance on debt financing or potentially higher interest rates on existing or new debt.
- Effective Income Tax Rate
- The effective income tax rate experienced a significant decrease from 25.90% in 2021 to 15.30% in 2022. It then showed a modest increase over the following three years, reaching 17.10% in 2025. This fluctuation could be attributed to changes in tax laws, geographic earnings mix, or the utilization of tax credits and deductions. The increase from 2022 onwards suggests a normalization of the tax rate, though it remains below the 2021 level.
- Combined Impact
- The increasing interest paid, net of tax, coupled with the fluctuating effective income tax rate, warrants further investigation. While the net-of-tax interest expense is rising, the effective income tax rate’s movement impacts the overall after-tax cost of debt. The relatively stable increase in net interest paid from 2023-2025, despite the increasing EITR, suggests that the increase in gross interest expense is offsetting the impact of the higher tax rate. A deeper analysis of the company’s debt structure and tax planning strategies is recommended to fully understand these trends.
Continued monitoring of these figures is crucial to assess the sustainability of the company’s financial position and its ability to manage its debt obligations effectively.
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Enterprise Value to FCFF Ratio, Current
Eaton Corp. plc, current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 154,249) |
| Free cash flow to the firm (FCFF) | 3,918) |
| Valuation Ratio | |
| EV/FCFF | 39.37 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | 305.43 |
| Caterpillar Inc. | 38.36 |
| GE Aerospace | 38.42 |
| Honeywell International Inc. | 26.47 |
| Lockheed Martin Corp. | 20.37 |
| RTX Corp. | 31.00 |
| EV/FCFF, Sector | |
| Capital Goods | 35.72 |
| EV/FCFF, Industry | |
| Industrials | 28.84 |
Based on: 10-K (reporting date: 2025-12-31).
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
Eaton Corp. plc, historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 154,439) | 120,944) | 122,149) | 76,903) | 67,594) | |
| Free cash flow to the firm (FCFF)2 | 3,918) | 3,865) | 3,174) | 2,300) | 1,771) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 39.42 | 31.29 | 38.49 | 33.44 | 38.16 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Boeing Co. | 355.43 | — | 25.63 | 37.53 | — | |
| Caterpillar Inc. | 41.17 | 18.32 | 16.08 | 23.54 | 20.50 | |
| GE Aerospace | 39.48 | 38.98 | 29.56 | 17.29 | 56.53 | |
| Honeywell International Inc. | 28.64 | 27.10 | 29.13 | 29.82 | 25.22 | |
| Lockheed Martin Corp. | 20.74 | 20.56 | 17.62 | 19.69 | 13.92 | |
| RTX Corp. | 31.66 | 34.48 | 23.86 | 28.45 | 27.29 | |
| EV/FCFF, Sector | ||||||
| Capital Goods | 37.64 | 46.45 | 23.34 | 25.87 | 32.16 | |
| EV/FCFF, Industry | ||||||
| Industrials | 29.85 | 31.37 | 25.97 | 24.33 | 28.81 | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
3 2025 Calculation
EV/FCFF = EV ÷ FCFF
= 154,439 ÷ 3,918 = 39.42
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibits fluctuations over the five-year period. Enterprise Value demonstrates a generally increasing trend, while Free Cash Flow to the Firm also shows growth, though with some variation in the rate of increase. The resulting EV/FCFF ratio reflects these combined movements.
- Enterprise Value
- Enterprise Value increased from US$67,594 million in 2021 to US$76,903 million in 2022, representing a substantial rise. This growth continued significantly in 2023, reaching US$122,149 million. A slight decrease was observed in 2024 to US$120,944 million, followed by a further increase to US$154,439 million in 2025. This indicates a generally positive trajectory in overall company value, with a minor dip in 2024.
- Free Cash Flow to the Firm
- Free Cash Flow to the Firm increased from US$1,771 million in 2021 to US$2,300 million in 2022. The rate of increase accelerated in 2023, reaching US$3,174 million. Continued growth was observed in 2024, with FCFF reaching US$3,865 million, and a more moderate increase in 2025 to US$3,918 million. This suggests improving cash generation capabilities.
- EV/FCFF Ratio
- The EV/FCFF ratio began at 38.16 in 2021, decreased to 33.44 in 2022, and then increased to 38.49 in 2023. A decrease was noted in 2024, with the ratio falling to 31.29. Finally, the ratio increased again in 2025, reaching 39.42. The fluctuations suggest a dynamic relationship between enterprise value and free cash flow, with the ratio remaining relatively high throughout the period, indicating that the market values the firm at a significant multiple of its free cash flow.
The observed increases in both Enterprise Value and Free Cash Flow to the Firm are positive indicators. However, the fluctuating EV/FCFF ratio suggests that the market’s assessment of the firm’s value relative to its cash flow is subject to change, potentially influenced by broader market conditions or company-specific factors.
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