Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Edwards Lifesciences 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).
The financial trajectory from 2017 to 2021 is characterized by moderate volatility in cash generation followed by a substantial expansion in the final year. Both net cash provided by operating activities and free cash flow to the firm (FCFF) demonstrate a correlated movement, indicating that the firm's ability to generate free cash flow is heavily dependent on its core operating performance.
- Operating Cash Flow Trends
- Net cash provided by operating activities exhibited a fluctuating pattern, declining from 1,000,700 thousand in 2017 to 926,800 thousand in 2018. A recovery followed in 2019, reaching 1,179,400 thousand, before a slight contraction to 1,054,300 thousand in 2020. The period concluded with a significant surge in 2021, where operating cash flow rose to 1,732,100 thousand, representing a 64.3% increase over the previous year.
- Free Cash Flow to the Firm (FCFF) Analysis
- FCFF followed a similar volatile path, with a decline in 2018 to 714,276 thousand and a subsequent peak in 2019 at 918,908 thousand. A notable dip occurred in 2020, where FCFF fell to its lowest point in the five-year period at 664,874 thousand. However, 2021 saw a sharp reversal, with FCFF climbing to 1,420,139 thousand, marking a 113.6% increase from the 2020 level.
- Cash Flow Conversion and Capital Investment
- The relationship between operating cash flow and FCFF suggests varying levels of capital expenditure over the period. In 2020, the gap between operating cash flow and FCFF widened significantly, with FCFF representing only 63.1% of operating cash flow, implying a period of intensified capital investment. In contrast, by 2021, the conversion efficiency improved, with FCFF accounting for 82% of operating cash flow, signaling a more streamlined transition from operating gains to available cash for the firm.
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Interest Paid, Net of Tax
Edwards Lifesciences 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, tax = Cash paid during the year for interest × EITR
= 20,200 × 11.69% = 2,361
An analysis of the financial outflows related to interest payments and the effective income tax rate reveals a period of significant volatility followed by a phase of stabilization between 2017 and 2021.
- Cash Paid for Interest, Net of Tax
- A substantial increase in net interest payments occurred in 2018, where expenditures rose to 29,176 thousand US dollars from 16,877 thousand US dollars in 2017. Following this peak, payments decreased sharply in 2019 to 17,908 thousand US dollars and remained remarkably consistent through 2021, ending the period at 17,839 thousand US dollars. This indicates that the 2018 spike was a transient event rather than a structural shift in the debt profile.
- Effective Income Tax Rate (EITR) Trends
- The effective income tax rate experienced a sharp decline from 15.19% in 2017 to a low of 3.07% in 2018. Subsequently, the rate recovered to 10.01% in 2019 and maintained a gradual upward trajectory, reaching 11.69% by the end of 2021. The volatility observed between 2017 and 2019 suggests fluctuations in taxable income or the impact of one-time tax adjustments.
- Correlation and Stability Analysis
- The convergence of the highest net interest payment and the lowest effective income tax rate in 2018 suggests a period of atypical financial conditions. Because interest payments are reported net of tax, the reduction in the tax shield provided by a lower EITR contributes to a higher net cost of borrowing. However, the high degree of stability in both the EITR and interest payments from 2019 through 2021 reflects a stabilized fiscal environment and a consistent approach to debt service.
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Enterprise Value to FCFF Ratio, Current
Edwards Lifesciences Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 66,267,039) |
| Free cash flow to the firm (FCFF) | 1,420,139) |
| Valuation Ratio | |
| EV/FCFF | 46.66 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 22.45 |
| Elevance Health Inc. | 19.19 |
| Intuitive Surgical Inc. | 56.46 |
| Medtronic PLC | 21.33 |
| UnitedHealth Group Inc. | 20.10 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 19.44 |
| EV/FCFF, Industry | |
| Health Care | 25.00 |
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
Edwards Lifesciences 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 | 66,267,037) | 53,931,479) | 47,290,710) | 36,573,998) | 27,806,373) | |
| Free cash flow to the firm (FCFF)2 | 1,420,139) | 664,874) | 918,908) | 714,276) | 842,077) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 46.66 | 81.12 | 51.46 | 51.20 | 33.02 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | 23.47 | — | — | — | — | |
| Elevance Health Inc. | 12.74 | — | — | — | — | |
| Intuitive Surgical Inc. | 56.01 | — | — | — | — | |
| Medtronic PLC | 33.84 | — | — | — | — | |
| UnitedHealth Group Inc. | 22.21 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | 23.51 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 17.80 | — | — | — | — | |
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
= 66,267,037 ÷ 1,420,139 = 46.66
4 Click competitor name to see calculations.
The enterprise value demonstrates a consistent and strong upward trajectory over the five-year period, increasing from US$ 27.8 billion in 2017 to US$ 66.3 billion by the end of 2021. In contrast, the free cash flow to the firm (FCFF) exhibits significant volatility, characterized by fluctuations that include a period low in 2020 followed by a sharp recovery to a peak of US$ 1.42 billion in 2021.
- EV/FCFF Ratio Progression
- The EV/FCFF ratio shows a general increase from 33.02 in 2017, peaking at 81.12 in 2020. This trend indicates that the market valuation of the firm expanded at a significantly faster rate than its ability to generate free cash flow during the majority of the analyzed period.
- Valuation Peak in 2020
- The highest ratio observed in 2020 (81.12) resulted from the combination of a continuing rise in enterprise value and a simultaneous decline in FCFF to US$ 664.9 million. This divergence suggests a period of high valuation premiums relative to immediate cash generation.
- Ratio Correction in 2021
- A notable contraction in the ratio to 46.66 occurred in 2021. This correction was driven by a substantial increase in FCFF, which more than doubled compared to the previous year, effectively offsetting the continued growth in enterprise value and bringing the multiple back toward historical levels.
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