Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Humana Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
The financial trajectory of cash flows from 2019 to 2023 exhibits a period of initial stability, a significant contraction in 2021, and a subsequent partial recovery.
- Operating Cash Flow Trends
- Net cash provided by operating activities peaked in 2020 at 5,639 million USD before experiencing a substantial decline of approximately 60% in 2021 to 2,262 million USD. A recovery occurred in 2022, with values rising to 4,587 million USD, followed by a moderate decrease to 3,981 million USD in 2023.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF followed a pattern closely aligned with operating cash flows. After reaching 4,861 million USD in 2020, FCFF dropped sharply to 1,191 million USD in 2021. While a strong rebound was observed in 2022 at 3,745 million USD, the 2023 value of 3,482 million USD indicates a stabilization at a lower level than the 2019-2020 peak.
- Cash Flow Correlation and Variance
- A consistent positive correlation exists between operating cash flows and FCFF throughout the analyzed period. The difference between these two metrics remains relatively stable, suggesting that the capital expenditures or adjustments required to arrive at FCFF from operating cash flow have not fluctuated as drastically as the overall cash flow volumes themselves.
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Interest Paid, Net of Tax
Humana Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
2 2023 Calculation
Interest payments, tax = Interest payments × EITR
= 394 × 25.18% = 99
A consistent upward trend is observed in the after-tax cost of interest payments between 2019 and 2023. Net interest payments rose from 165 million USD in 2019 to 295 million USD by the end of 2023, representing a cumulative increase of approximately 78.8% over the five-year period.
- Growth Pattern of Net Interest Payments
- Interest payments, net of tax, increased every year throughout the analyzed period. The most significant year-over-year growth occurred between 2020 and 2021, when payments rose from 186 million USD to 245 million USD, an increase of 31.7%. While the growth rate decelerated in 2022 and 2023, the total expenditure continued to reach new highs, ending the period at 295 million USD.
- Effective Income Tax Rate Volatility
- The effective income tax rate (EITR) demonstrated notable volatility. After an increase to 27.96% in 2020, the rate experienced a sharp decline to 14.19% in 2021. A recovery trend followed, with the rate climbing to 21.38% in 2022 and further increasing to 25.18% by the end of 2023.
- Analysis of Tax Shield Impact
- The acceleration of net interest costs in 2021 coincides with the period's lowest effective income tax rate. Since the tax deductibility of interest provides a shield that reduces the net cost of borrowing, the drop in EITR to 14.19% reduced the value of this shield, thereby increasing the net cash outflow for interest payments. The subsequent rise in EITR from 2022 to 2023 likely mitigated what would have been an even steeper increase in net interest payments, assuming gross interest obligations continued to rise.
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Enterprise Value to FCFF Ratio, Current
Humana Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 22,813) |
| Free cash flow to the firm (FCFF) | 3,482) |
| Valuation Ratio | |
| EV/FCFF | 6.55 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 26.17 |
| Elevance Health Inc. | 20.60 |
| Intuitive Surgical Inc. | 64.76 |
| Medtronic PLC | 25.45 |
| UnitedHealth Group Inc. | 21.60 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 21.34 |
| EV/FCFF, Industry | |
| Health Care | 34.89 |
Based on: 10-K (reporting date: 2023-12-31).
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
Humana Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 34,660) | 55,740) | 50,040) | 38,505) | 39,875) | |
| Free cash flow to the firm (FCFF)2 | 3,482) | 3,745) | 1,191) | 4,861) | 4,713) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 9.95 | 14.88 | 42.03 | 7.92 | 8.46 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | 36.51 | 23.24 | 23.47 | — | — | |
| Elevance Health Inc. | 14.19 | 13.32 | 12.74 | — | — | |
| Intuitive Surgical Inc. | 170.92 | 85.45 | 56.01 | — | — | |
| Medtronic PLC | 26.54 | 20.32 | 33.84 | — | — | |
| UnitedHealth Group Inc. | 17.59 | 19.30 | 22.21 | — | — | |
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | 22.68 | 20.44 | 23.51 | — | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 25.98 | 18.66 | 17.80 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 34,660 ÷ 3,482 = 9.95
4 Click competitor name to see calculations.
The financial trajectory of the Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio indicates a period of significant instability followed by a return toward historical norms. The valuation multiple experienced an extreme peak in 2021, though it has since contracted as cash flow levels stabilized and the enterprise value adjusted.
- Enterprise Value (EV) Dynamics
- Enterprise value remained relatively stable between 2019 and 2020 before entering a growth phase that peaked at 55,740 million US dollars in 2022. However, 2023 saw a substantial correction, with the value falling to 34,660 million US dollars, marking the lowest point within the analyzed five-year period.
- Free Cash Flow to the Firm (FCFF) Performance
- Cash flow generation was consistent in 2019 and 2020 but suffered a severe contraction in 2021, dropping to 1,191 million US dollars. A recovery occurred in 2022 and 2023, with FCFF stabilizing between 3,482 million and 3,745 million US dollars, although these levels remain below the baseline established in 2019 and 2020.
- EV/FCFF Ratio Interpretation
- The valuation multiple shifted from a narrow range of 7.92 to 8.46 in the early period to an anomalous high of 42.03 in 2021. This spike was primarily driven by the precipitous drop in FCFF rather than a proportional surge in enterprise value. Subsequent years showed a steady decompression of the ratio, falling to 14.88 in 2022 and further to 9.95 in 2023, suggesting a realignment of the company's valuation with its actual cash-generating capacity.
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