Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Hershey Co., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
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The financial trajectory between 2018 and 2022 indicates a consistent upward trend in cash generation, characterized by strong operational efficiency and the ability to maintain substantial free cash flow to the firm (FCFF) despite a temporary contraction in 2020.
- Net Cash Provided by Operating Activities
- Operating cash flows grew from approximately $1.60 billion in 2018 to $2.33 billion in 2022. A marginal decline occurred in 2020, with values falling to $1.70 billion, before experiencing a significant acceleration in 2021 and 2022. This progression suggests a robust recovery and an expanded capacity to generate cash from core business operations.
- Free Cash Flow to the Firm (FCFF)
- FCFF mirrored the trend of operating cash flows, increasing from $1.39 billion in 2018 to $1.92 billion in 2022. The most notable volatility occurred in 2020, where FCFF decreased to $1.39 billion, representing a contraction from the 2019 peak of $1.56 billion. Subsequent growth in 2021 and 2022 indicates a successful return to expansionary cash flow levels.
- Cash Flow Conversion and Stability
- A high correlation is observed between operating cash flows and FCFF, with a significant portion of operating cash consistently being converted into free cash flow. Although the conversion rate experienced a slight dip in 2020, it remained stable through 2022, suggesting that capital expenditures remained well-managed relative to the growth in operational cash inflows.
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Interest Paid, Net of Tax
Hershey Co., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
2 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 131,757 × 14.20% = 18,709
3 2022 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 8,131 × 14.20% = 1,155
The financial data reveals a fluctuating trend in net interest costs and a general increase in capitalized interest over the five-year period from 2018 to 2022. While operational interest payments peaked in 2020, there was a subsequent shift toward higher capitalization of interest peaking in 2021.
- Net Interest Paid Trends
- Interest paid, net of tax, demonstrated an upward trajectory from 2018 (US$ 109.96 million) to a peak in 2020 (US$ 128.74 million). A notable contraction occurred in 2021, with expenditures falling to US$ 105.37 million, followed by a moderate increase to US$ 113.05 million in 2022. This volatility indicates shifts in debt obligations or changes in the weighted average cost of debt over the observed period.
- Capitalized Interest Analysis
- A consistent growth pattern is observed in capitalized interest, net of tax, which rose from US$ 4.23 million in 2018 to a peak of US$ 7.68 million in 2021. This upward trend suggests an increase in the financing of qualifying capital assets or long-term infrastructure projects. A slight decrease to US$ 6.98 million was recorded in 2022, though the value remains substantially higher than the 2018 levels.
- Effective Income Tax Rate Influence
- The Effective Income Tax Rate (EITR) exhibited volatility, ranging from a high of 17.50% in 2021 to a low of 14.20% in 2022. Because the interest figures are presented net of tax, the declining tax rate in 2022 likely mitigated the reported net cost of interest, whereas the peak tax rate in 2021 increased the tax shield associated with interest expenses.
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Enterprise Value to FCFF Ratio, Current
Hershey Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 52,082,977) |
| Free cash flow to the firm (FCFF) | 1,918,763) |
| Valuation Ratio | |
| EV/FCFF | 27.14 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Coca-Cola Co. | 65.97 |
| Mondelēz International Inc. | 30.45 |
| PepsiCo Inc. | 24.36 |
| Philip Morris International Inc. | 29.95 |
| EV/FCFF, Sector | |
| Food, Beverage & Tobacco | 36.96 |
| EV/FCFF, Industry | |
| Consumer Staples | 47.30 |
Based on: 10-K (reporting date: 2022-12-31).
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
Hershey Co., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 53,436,870) | 46,279,575) | 34,804,244) | 37,362,005) | 26,861,195) | |
| Free cash flow to the firm (FCFF)2 | 1,918,763) | 1,706,486) | 1,388,526) | 1,558,307) | 1,385,582) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 27.85 | 27.12 | 25.07 | 23.98 | 19.39 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Coca-Cola Co. | 27.95 | 25.28 | — | — | — | |
| Mondelēz International Inc. | 34.05 | 31.98 | — | — | — | |
| PepsiCo Inc. | 40.39 | 33.08 | — | — | — | |
| Philip Morris International Inc. | 19.53 | 16.35 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Food, Beverage & Tobacco | 28.47 | 24.71 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Consumer Staples | 30.06 | 20.91 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 53,436,870 ÷ 1,918,763 = 27.85
4 Click competitor name to see calculations.
Between 2018 and 2022, there was a consistent expansion in the valuation multiple relative to cash flow generation. The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibited a steady upward trajectory, increasing from 19.39 in 2018 to 27.85 by the end of 2022.
- Enterprise Value Trends
- The Enterprise Value experienced substantial growth over the five-year period, rising from approximately 26.86 billion US$ in 2018 to 53.44 billion US$ in 2022. While a slight contraction occurred in 2020, the overall trend reflects a significant appreciation in the total market value of the firm, nearly doubling over the analyzed timeframe.
- Free Cash Flow to the Firm (FCFF) Performance
- Free cash flow to the firm demonstrated a general positive trend, growing from 1.39 billion US$ in 2018 to 1.92 billion US$ in 2022. However, the growth in cash generation was more moderate than the growth in Enterprise Value, characterized by a temporary decline in 2020 before recovering and reaching its peak in 2022.
- EV/FCFF Ratio Analysis
- The persistent year-over-year increase in the EV/FCFF ratio indicates that the enterprise valuation expanded at a rate that significantly outpaced the growth of free cash flows. This divergence suggests that the market attributed an increasing premium to the firm's cash flows over time, which may be indicative of heightened growth expectations or a general expansion in industry valuation multiples.
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