Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Estée Lauder Cos. Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
The financial trajectory from 2018 to 2023 reflects a period of initial stability followed by significant volatility in both operating cash flows and free cash flow to the firm (FCFF).
- Operating Cash Flow Trends
- Net cash flows provided by operating activities exhibited relative consistency between 2018 and 2020, with values ranging from 2,280 million to 2,573 million US$. A sharp increase was recorded in 2021, reaching a peak of 3,631 million US$, before a consistent decline occurred over the following two years, ending at 1,731 million US$ in 2023.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF followed a similar pattern to operating cash flows through 2022, maintaining positive values and peaking in 2021 at 3,137 million US$. However, the 2023 fiscal year shows a severe reversal, with FCFF dropping to negative 1,388 million US$, representing a substantial deficit compared to previous periods.
- Analysis of Cash Flow Divergence
- A significant divergence between operating cash flows and FCFF is observed in 2023. Despite the company maintaining a positive operating cash flow of 1,731 million US$, the FCFF fell deeply into negative territory. This discrepancy indicates a substantial increase in capital expenditures or investment outflows during the 2023 period that far exceeded the cash generated from core business operations.
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Interest Paid, Net of Tax
Estée Lauder Cos. Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
2 2023 Calculation
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 235 × 27.70% = 65
An analysis of interest payments net of tax over the six-year period ending June 30, 2023, reveals a general upward trajectory in cash outflows accompanied by significant volatility in the effective income tax rate.
- Cash Outflow Trends
- Interest payments net of tax remained remarkably stable between 2018 and 2020, hovering between 101 million and 102 million USD. Beginning in 2021, a growth trend emerged, with payments increasing to 143 million USD. Although a slight contraction to 129 million USD was observed in 2022, the outflow reached a period peak of 170 million USD by June 30, 2023, representing an overall increase of approximately 68% since 2018.
- Effective Income Tax Rate Volatility
- The effective income tax rate exhibited substantial fluctuation throughout the period. A significant peak occurred in 2020 at 33.50%, followed by a sharp decline to a period low of 13.70% in 2021. In the subsequent two years, the rate trended upward, closing at 27.70% in 2023.
- Interaction Between Tax Rates and Interest Costs
- The increase in net cash paid for interest suggests an expansion of gross interest obligations that outweighed the mitigating effects of tax shields. Specifically, the jump in net payments in 2021 coincided with the lowest effective tax rate of the period; this reduction in the tax rate decreased the tax-deductibility benefit of interest expenses, thereby increasing the net cash cost of servicing debt.
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Enterprise Value to FCFF Ratio, Current
Estée Lauder Cos. Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 60,132) |
| Free cash flow to the firm (FCFF) | (1,388) |
| Valuation Ratio | |
| EV/FCFF | — |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Procter & Gamble Co. | 22.86 |
| EV/FCFF, Industry | |
| Consumer Staples | 41.49 |
Based on: 10-K (reporting date: 2023-06-30).
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
Estée Lauder Cos. Inc., historical EV/FCFF calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 60,132) | 96,188) | 123,779) | 81,575) | 71,573) | 50,639) | |
| Free cash flow to the firm (FCFF)2 | (1,388) | 2,129) | 3,137) | 1,759) | 1,877) | 2,045) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | — | 45.17 | 39.45 | 46.38 | 38.13 | 24.76 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| Procter & Gamble Co. | 27.39 | 26.63 | 22.86 | — | — | — | |
| EV/FCFF, Industry | |||||||
| Consumer Staples | 30.22 | 30.06 | 20.91 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 60,132 ÷ -1,388 = —
4 Click competitor name to see calculations.
The Enterprise Value (EV) exhibited significant volatility over the six-year period, characterized by a period of rapid expansion followed by a sharp contraction. From June 30, 2018, to June 30, 2021, EV increased from $50,639 million to a peak of $123,779 million. This upward trajectory reversed after 2021, with the value declining to $60,132 million by June 30, 2023.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF remained positive from 2018 through 2022, although it experienced fluctuations. A peak in cash generation occurred in 2021 at $3,137 million. However, a severe downturn was observed in the final year of the period, with FCFF falling to negative $1,388 million in 2023, marking a shift from cash surplus to a cash deficit.
- EV/FCFF Ratio Trends
- The EV/FCFF ratio trended upward between 2018 and 2020, rising from 24.76 to 46.38, which indicates that the enterprise valuation grew at a rate exceeding the growth of free cash flows. The ratio remained elevated through 2022, fluctuating between 39.45 and 45.17.
- Valuation Divergence
- A significant divergence between valuation and cash flow is evident in 2023. While the Enterprise Value decreased, the transition to a negative FCFF rendered the EV/FCFF ratio unavailable for calculation. This suggests that the company's valuation is no longer supported by positive free cash flow generation during the final observed period.
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