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General Electric Co. (GE)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Free Cash Flow to The Firm (FCFF)

General Electric Co., FCFF calculation

USD $ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net earnings (loss) attributable to the Company (22,355) (5,786) 8,831  (6,126) 15,233 
Net (earnings) loss attributable to noncontrolling interests (88) (270) (291) 331  112 
Net noncash charges 26,832  14,165  (5,600) 19,554  15,165 
(Increase) decrease in operating capital 273  3,285  3,159  (1,903) (2,995)
Cash from operating activities 4,662  11,394  6,099  11,856  27,515 
Cash paid during the year for interest, net of tax1 4,528  1,394  6,074  1,988  8,575 
Additions to property, plant and equipment (7,695) (7,371) (7,199) (7,309) (13,727)
Dispositions of property, plant and equipment 4,519  5,746  4,424  3,020  6,262 
Additions to internal-use software (361) (549) (749) (778) — 
Free cash flow to the firm (FCFF) 5,653  10,614  8,649  8,777  28,625 

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

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Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the General Electric Co.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. General Electric Co.’s FCFF increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Interest Paid, Net of Tax

General Electric Co., interest paid, net of tax calculation

USD $ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Effective Income Tax Rate (EITR)
EITR1 -2.70% 72.40% -5.10% 79.20% 10.30%
Interest Paid, Net of Tax
Cash paid during the year for interest, before tax 4,409  5,049  5,779  9,558  9,560 
Less: Cash paid during the year for interest, tax2 (119) 3,655  (295) 7,570  985 
Cash paid during the year for interest, net of tax 4,528  1,394  6,074  1,988  8,575 

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

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2 2018 Calculation
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 4,409 × -2.70% = -119

Enterprise Value to FCFF Ratio, Current

General Electric Co., current EV/FCFF calculation, comparison to benchmarks

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Selected Financial Data (USD $ in millions)
Enterprise value (EV) 132,822 
Free cash flow to the firm (FCFF) 5,653 
Ratio
EV/FCFF 23.50
Benchmarks
EV/FCFF, Competitors1
3M Co. 20.38
Danaher Corp. 31.45
Honeywell International Inc. 20.82
EV/FCFF, Sector
General Industrials 16.77
EV/FCFF, Industry
Industrials 22.79

Based on: 10-K (filing date: 2019-02-26).

1 Click competitor name to see calculations.

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Enterprise Value to FCFF Ratio, Historical

General Electric Co., historical EV/FCFF calculation, comparison to benchmarks

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 154,405  196,136  308,838  372,010  497,126 
Free cash flow to the firm (FCFF)2 5,653  10,614  8,649  8,777  28,625 
Ratio
EV/FCFF3 27.31 18.48 35.71 42.38 17.37
Benchmarks
EV/FCFF, Competitors4
3M Co. 24.76 28.46 21.40 19.78 20.82
Danaher Corp. 25.21 25.94 26.16 21.88 19.11
Honeywell International Inc. 19.22 22.51 21.27 18.68 19.99
EV/FCFF, Sector
General Industrials 17.22 22.13 29.18 25.19 18.53
EV/FCFF, Industry
Industrials 22.69 24.75 23.33 19.95 19.32

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

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2 See Details »

3 2018 Calculation
EV/FCFF = EV ÷ FCFF
= 154,405 ÷ 5,653 = 27.31

4 Click competitor name to see calculations.

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. General Electric Co.’s EV/FCFF ratio declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.