Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Ecolab Inc., 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).
Financial performance from 2017 to 2021 demonstrates a period of steady growth followed by a temporary contraction and subsequent recovery. Both cash provided by operating activities and free cash flow to the firm (FCFF) exhibit a synchronized trajectory, indicating a strong correlation between operational efficiency and the cash available to all capital providers.
- Cash Provided by Operating Activities
- A positive growth trend is observed between 2017 and 2019, with values increasing from 2,091,300 thousand US$ to a peak of 2,420,700 thousand US$. This period of expansion was interrupted in 2020, where a significant decline to 1,741,800 thousand US$ occurred. By December 31, 2021, a recovery was evident, with the figure rising back to 2,061,900 thousand US$, nearly returning to 2017 levels.
- Free Cash Flow to the Firm (FCFF)
- The FCFF followed a similar pattern to operating cash flows, rising from 1,385,663 thousand US$ in 2017 to 1,777,302 thousand US$ in 2019. A contraction is noted in 2020, with FCFF dropping to 1,475,400 thousand US$. A subsequent increase to 1,587,738 thousand US$ was recorded in 2021, reflecting a resilient capacity to generate cash despite the volatility observed in the preceding year.
- Operational Conversion and Cash Efficiency
- The relationship between operating cash flows and FCFF suggests a consistent conversion rate. In 2019, the conversion of operating cash to FCFF reached a high point relative to the early period. Notably, in 2020, while total cash from operations dropped sharply, the FCFF remained more resilient, suggesting a potential reduction in capital expenditures or other outflows during that fiscal year to preserve liquidity. The 2021 data indicates a return to normalized spending patterns as both metrics rebounded in tandem.
AI Ask an analyst for more
Interest Paid, Net of Tax
Ecolab Inc., 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
Net interest paid, tax = Net interest paid × EITR
= 208,700 × 19.10% = 39,862
The financial data reveals a period of volatility in both the effective income tax rate and the net interest obligations between 2017 and 2021. A general decline in the tax rate is evident through 2020, while interest payments remained relatively consistent except for a significant increase in the 2020 fiscal year.
- Effective Income Tax Rate (EITR) Trends
- The EITR experienced a consistent downward trajectory from a peak of 31.90% in 2017 to a low of 15.20% in 2020. This represents a reduction of 16.7 percentage points over four years. A partial reversal occurred in 2021, where the rate increased to 19.10%, although it remained significantly lower than the initial 2017 baseline.
- Net Interest Paid, Net of Tax
- Net interest payments remained relatively stable between 2017 and 2019, fluctuating within a narrow range between 157.2 million and 163.5 million US dollars. A sharp increase was recorded in 2020, with payments rising to 222.6 million US dollars, marking the peak for the five-year period. By 2021, this figure normalized to 168.8 million US dollars, returning to levels comparable to the 2017-2019 average.
- Analysis of Financial Interrelationship
- The spike in net interest paid in 2020 coincided with the lowest recorded effective income tax rate of 15.20%. Given that these payments are reported net of tax, the substantial increase in 2020 suggests a significant rise in gross interest obligations that outweighed the tax-shielding benefit provided by the lower EITR. The subsequent decline in 2021, occurring alongside a rising tax rate, indicates a reduction in total interest-bearing liabilities or a shift in the company's debt structure.
AI Ask an analyst for more
Enterprise Value to FCFF Ratio, Current
Ecolab Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 60,128,502) |
| Free cash flow to the firm (FCFF) | 1,587,738) |
| Valuation Ratio | |
| EV/FCFF | 37.87 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Linde plc | 42.90 |
| Sherwin-Williams Co. | 29.87 |
| EV/FCFF, Sector | |
| Chemicals | 35.43 |
| EV/FCFF, Industry | |
| Materials | 28.68 |
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
Ecolab Inc., 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 | 60,128,501) | 65,306,947) | 58,207,834) | 55,962,006) | 44,975,738) | |
| Free cash flow to the firm (FCFF)2 | 1,587,738) | 1,475,400) | 1,777,302) | 1,594,069) | 1,385,663) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 37.87 | 44.26 | 32.75 | 35.11 | 32.46 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Linde plc | 23.60 | — | — | — | — | |
| Sherwin-Williams Co. | 36.70 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Chemicals | 26.76 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Materials | 20.85 | — | — | — | — | |
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
= 60,128,501 ÷ 1,587,738 = 37.87
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio from 2017 to 2021 indicates a period of valuation expansion and subsequent volatility, with a notable peak occurring in 2020.
- Enterprise Value Trends
- A consistent upward trajectory in Enterprise Value was observed from 2017 through 2020, rising from 44.98 billion US$ to a peak of 65.31 billion US$. This growth represents a significant increase in the total market valuation of the entity's operations. In 2021, a contraction occurred, with the value decreasing to 60.13 billion US$, suggesting a correction in valuation.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated steady growth during the first three years of the period, increasing from 1.39 billion US$ in 2017 to 1.78 billion US$ in 2019. A decline was recorded in 2020, where cash flow dropped to 1.48 billion US$, before recovering to 1.59 billion US$ by the end of 2021.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio remained relatively stable between 2017 and 2019, fluctuating within a narrow range of 32.46 to 35.11. A sharp spike to 44.26 occurred in 2020, driven by the simultaneous increase in Enterprise Value and the decrease in FCFF. This divergence indicates a temporary expansion in the valuation multiple. By 2021, the ratio moderated to 37.87, reflecting a partial normalization as Enterprise Value declined and cash flow generation improved.
AI Ask an analyst for more