Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Generac Holdings 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).
The financial data reveals several notable trends in the company's cash flow metrics over the five-year period ending December 31, 2021.
- Net cash provided by operating activities
- This figure demonstrates a generally positive trajectory with some fluctuations. Starting at $261.1 million in 2017, it slightly declined to $247.2 million in 2018. It then increased significantly in 2019 to approximately $308.9 million and reached a peak in 2020 at $486.5 million. In 2021, net cash from operating activities declined to $411.2 million but remained substantially higher than the initial years, indicating strong operational cash flow generation capabilities.
- Free cash flow to the firm (FCFF)
- The free cash flow to the firm follows a pattern somewhat similar to operating cash flow but with lower absolute values, reflecting capital expenditures and other investing activities. FCFF started at $254.6 million in 2017, decreased slightly to $231.5 million in 2018, then increased to $267.4 million in 2019. In 2020, there was a pronounced surge to $443.2 million, which dropped noticeably to $319.8 million in 2021. This trend suggests effective capital management with a peak in 2020 possibly due to operational efficiencies or reduced investments, followed by a moderate reduction in 2021.
Overall, the company exhibited strong cash generation from its operations across the period, with a particularly strong performance in 2020. The trends suggest resilience and capacity for cash flow generation, despite some volatility between years. The decline in 2021 from peak levels may warrant further investigation to understand underlying causes, such as increased capital expenditures, changes in working capital, or other financial activities.
Interest Paid, Net of Tax
Generac Holdings Inc., interest paid, net of tax calculation
US$ 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
Cash paid during the period, interest, tax = Cash paid during the period, interest × EITR
= 27,842 × 19.50% = 5,429
The analysis of the annual financial data reveals notable trends in two key financial metrics over the five-year period ending December 31, 2021.
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibits a decreasing trend throughout the period. Starting at 35.2% in 2017, the rate declined significantly to 22.7% in 2018, followed by a further decrease to 21.1% in 2019. The rate experienced a slight increase to 22.2% in 2020 before declining again to 19.5% in 2021. This overall reduction in tax rate over time may reflect changes in tax legislation, the company's tax planning strategies, or shifts in the composition of taxable income.
- Cash Paid During the Period, Interest, Net of Tax (US$ in thousands)
- The cash paid for interest, net of tax, fluctuates across the years, displaying no consistent upward or downward trend. The amount increased from $26,636 thousand in 2017 to $31,698 thousand in 2018, representing the highest cash outflow during the examined period. This was followed by a decrease to $27,982 thousand in 2019. A more pronounced decline occurred in 2020, with interest payments dropping to $22,379 thousand, remaining relatively stable in 2021 at $22,413 thousand. These changes may indicate variations in the company's debt levels, interest rates, or financing strategies.
Enterprise Value to FCFF Ratio, Current
Generac Holdings Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 16,922,251) |
| Free cash flow to the firm (FCFF) | 319,810) |
| Valuation Ratio | |
| EV/FCFF | 52.91 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | 355.43 |
| Caterpillar Inc. | 31.01 |
| Eaton Corp. plc | 37.16 |
| GE Aerospace | 40.50 |
| Honeywell International Inc. | 29.36 |
| Lockheed Martin Corp. | 21.08 |
| RTX Corp. | 50.26 |
| EV/FCFF, Sector | |
| Capital Goods | 58.75 |
| EV/FCFF, Industry | |
| Industrials | 43.43 |
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
Generac Holdings 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 | 18,849,998) | 21,165,351) | 7,290,571) | 3,929,062) | 3,669,977) | |
| Free cash flow to the firm (FCFF)2 | 319,810) | 443,226) | 267,365) | 231,538) | 254,573) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 58.94 | 47.75 | 27.27 | 16.97 | 14.42 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 20.50 | 23.83 | — | — | — | |
| Eaton Corp. plc | 38.16 | 21.94 | — | — | — | |
| GE Aerospace | 56.53 | — | — | — | — | |
| Honeywell International Inc. | 25.22 | 26.49 | — | — | — | |
| Lockheed Martin Corp. | 13.92 | — | — | — | — | |
| RTX Corp. | 27.29 | 35.26 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Capital Goods | 32.16 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Industrials | 28.80 | — | — | — | — | |
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
= 18,849,998 ÷ 319,810 = 58.94
4 Click competitor name to see calculations.
The data reveals significant changes in financial metrics over the five-year period ending December 31, 2021. Notably, the enterprise value (EV) of the company shows a substantial upward trend, increasing nearly fivefold from approximately $3.67 billion in 2017 to a peak of about $21.17 billion in 2020, before slightly declining to around $18.85 billion in 2021. This indicates a period of rapid valuation growth, possibly reflecting market optimism or increased operational scale.
Free cash flow to the firm (FCFF) fluctuates within a narrower range compared to EV. FCFF decreased modestly from $254.6 million in 2017 to $231.5 million in 2018, then experienced a rise to $267.4 million in 2019 and peaked significantly at $443.2 million in 2020. In 2021, FCFF declined to $319.8 million but remained well above the 2017 level. This pattern suggests the company improved its cash generation capacity over the period, with a notable peak during 2020.
The ratio of enterprise value to free cash flow to the firm (EV/FCFF) exhibits a pronounced growth trend, starting at 14.42 in 2017 and escalating steadily each year to reach 58.94 by 2021. This sharp increase in the valuation multiple indicates that the company's market valuation grew considerably faster than its free cash flow, implying heightened investor expectations or potential overvaluation relative to cash flow generation.
In summary, while the company's free cash flow demonstrated moderate growth with some volatility, the enterprise value surged dramatically, resulting in a substantially higher EV/FCFF ratio. This divergence highlights a market valuation trend potentially driven by factors beyond immediate cash flow performance, warranting further investigation into the drivers of valuation changes and sustainability of cash flow growth.