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Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate


Free Cash Flow to The Firm (FCFF)

General Electric Co., FCFF calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net earnings (loss) attributable to the Company (5,786) 8,831  (6,126) 15,233  13,057 
Net (earnings) loss attributable to noncontrolling interests (270) (291) 331  112  298 
Net noncash charges 14,165  (5,600) 19,554  15,165  15,282 
(Increase) decrease in operating capital 3,285  3,159  (1,903) (2,995) 400 
Cash from operating activities 11,394  6,099  11,856  27,515  29,037 
Cash paid during the year for interest, net of tax1 3,302  6,074  1,988  8,575  8,325 
Additions to property, plant and equipment (7,371) (7,199) (7,309) (13,727) (13,458)
Dispositions of property, plant and equipment 5,746  4,424  3,020  6,262  5,883 
Additions to internal-use software (549) (749) (778) –  – 
Free cash flow to the firm (FCFF) 12,522  8,649  8,777  28,625  29,787 

Based on: 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), 10-K (filing date: 2014-02-27).

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 declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Interest Paid, Net of Tax

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

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Effective Income Tax Rate (EITR)
EITR1 34.60% -5.10% 79.20% 10.30% 4.20%
Interest Paid, Net of Tax
Cash paid during the year for interest, before tax 5,049  5,779  9,558  9,560  8,690 
Less: Cash paid during the year for interest, tax2 1,747  (295) 7,570  985  365 
Cash paid during the year for interest, net of tax 3,302  6,074  1,988  8,575  8,325 

Based on: 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), 10-K (filing date: 2014-02-27).

2017 Calculations

2 Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 5,049 × 34.60% = 1,747


Enterprise Value to FCFF Ratio, Current

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

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 132,517 
Free cash flow to the firm (FCFF) 12,522 
Ratio
EV/FCFF 10.58
Benchmarks
EV/FCFF, Competitors
3M Co. 24.38
Danaher Corp. 26.75
Honeywell International Inc. 20.94
EV/FCFF, Sector
General Industrials 18.26
EV/FCFF, Industry
Industrials 21.94

Based on: 10-K (filing date: 2018-02-23).

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

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 196,136  308,838  372,010  497,126  512,566 
Free cash flow to the firm (FCFF)2 12,522  8,649  8,777  28,625  29,787 
Ratio
EV/FCFF3 15.66 35.71 42.38 17.37 17.21
Benchmarks
EV/FCFF, Competitors
3M Co. 28.46 21.40 19.78 20.82 20.85
Danaher Corp. 25.94 26.16 21.88 19.11 17.04
Honeywell International Inc. 23.24 21.27 18.68 19.99 21.05
EV/FCFF, Sector
General Industrials 22.13 29.18 25.19 18.53 18.32
EV/FCFF, Industry
Industrials 24.75 23.33 19.95 19.32 17.17

Based on: 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), 10-K (filing date: 2014-02-27).

2017 Calculations

3 EV/FCFF = EV ÷ FCFF
= 196,136 ÷ 12,522 = 15.66

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 2015 to 2016 and from 2016 to 2017.