Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
IQVIA Holdings Inc., FCFF calculation
US$ in millions
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).
The cash flow profile exhibits a strong growth trajectory from 2018 through 2021, followed by a contraction in 2022. Both net cash provided by operating activities and free cash flow to the firm peaked in the 2021 fiscal year before experiencing a downward adjustment.
- Net Cash Provided by Operating Activities
- Operating cash flows demonstrated consistent growth over a four-year period, rising from US$ 1,254 million in 2018 to a peak of US$ 2,942 million in 2021. The most pronounced acceleration occurred between 2020 and 2021, reflecting a substantial increase in cash generation. This trend reversed in 2022, with operating cash flows declining to US$ 2,260 million.
- Free Cash Flow to the Firm (FCFF)
- FCFF remained relatively stagnant between 2018 and 2019, with values of US$ 1,121 million and US$ 1,117 million respectively. A significant upward trend followed, with FCFF rising to US$ 1,546 million in 2020 and reaching a maximum of US$ 2,551 million in 2021. Similar to the operating cash flow trend, FCFF saw a reduction in 2022, falling to US$ 1,839 million.
- Cash Flow Conversion Analysis
- The proximity of FCFF to net cash provided by operating activities suggests a stable relationship between operating performance and free cash flow generation. The conversion rate fluctuated between approximately 79% and 89% over the period. The peak efficiency in converting operating cash to FCFF occurred in 2021, while the simultaneous decline in both metrics in 2022 indicates a broader reduction in cash generation capabilities during that fiscal year.
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Interest Paid, Net of Tax
IQVIA Holdings Inc., interest paid, net of tax calculation
US$ in millions
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, net, tax = Interest paid, net × EITR
= 379 × 19.08% = 72
An analysis of the financial data from 2018 to 2022 reveals a relatively stable trend in net interest payments despite significant volatility in the effective income tax rate. The net cost of interest paid remained within a narrow range, fluctuating between a low of 282 million USD and a high of 326 million USD over the five-year period.
- Effective Income Tax Rate (EITR) Volatility
- The effective income tax rate exhibited substantial variance, peaking at 32.95% in 2019 before declining to a low of 14.45% in 2021. This volatility indicates shifting tax burdens or the impact of one-time tax adjustments during the period, eventually stabilizing around 19.08% by the end of 2022.
- Interest Paid, Net of Tax Trends
- Net interest payments showed a non-linear pattern, with a decrease in 2019 (282 million USD), a recovery in 2020 (322 million USD), a subsequent dip in 2021 (293 million USD), and a moderate increase in 2022 (307 million USD). These fluctuations suggest that the gross interest expense was partially offset by the varying tax shields provided by the EITR.
- Correlation Between Tax Rates and Net Interest Costs
- A notable observation occurs in 2019, where the highest EITR (32.95%) coincides with the lowest net interest payment (282 million USD). This relationship suggests that the increased tax rate enhanced the tax deductibility of interest expenses, thereby reducing the net cash outflow for interest during that fiscal year.
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Enterprise Value to FCFF Ratio, Current
IQVIA Holdings Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 44,519) |
| Free cash flow to the firm (FCFF) | 1,839) |
| Valuation Ratio | |
| EV/FCFF | 24.21 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| AbbVie Inc. | 29.24 |
| Amgen Inc. | 27.80 |
| Bristol-Myers Squibb Co. | 11.19 |
| Danaher Corp. | 31.54 |
| Eli Lilly & Co. | 138.09 |
| Gilead Sciences Inc. | 21.65 |
| Johnson & Johnson | 32.49 |
| Merck & Co. Inc. | 29.42 |
| Pfizer Inc. | 19.26 |
| Regeneron Pharmaceuticals Inc. | 23.06 |
| Thermo Fisher Scientific Inc. | 36.63 |
| Vertex Pharmaceuticals Inc. | 41.26 |
| EV/FCFF, Sector | |
| Pharmaceuticals, Biotechnology & Life Sciences | 30.05 |
| EV/FCFF, Industry | |
| Health Care | 27.50 |
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
IQVIA Holdings Inc., 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 millions) | ||||||
| Enterprise value (EV)1 | 53,832) | 55,061) | 47,884) | 42,823) | 38,267) | |
| Free cash flow to the firm (FCFF)2 | 1,839) | 2,551) | 1,546) | 1,117) | 1,121) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 29.28 | 21.58 | 30.97 | 38.33 | 34.12 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| AbbVie Inc. | 12.15 | 13.18 | — | — | — | |
| Amgen Inc. | 16.01 | 15.82 | — | — | — | |
| Bristol-Myers Squibb Co. | 13.87 | 10.52 | — | — | — | |
| Danaher Corp. | 25.74 | 28.25 | — | — | — | |
| Eli Lilly & Co. | 59.17 | 38.39 | — | — | — | |
| Gilead Sciences Inc. | 13.58 | 8.42 | — | — | — | |
| Johnson & Johnson | 23.80 | 21.25 | — | — | — | |
| Merck & Co. Inc. | 19.09 | 23.27 | — | — | — | |
| Pfizer Inc. | 9.15 | 8.40 | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 23.31 | 9.81 | — | — | — | |
| Thermo Fisher Scientific Inc. | 31.61 | 33.14 | — | — | — | |
| Vertex Pharmaceuticals Inc. | 16.68 | 22.47 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | 18.08 | 16.12 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 18.66 | 17.80 | — | — | — | |
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
= 53,832 ÷ 1,839 = 29.28
4 Click competitor name to see calculations.
Between 2018 and 2022, the relationship between enterprise value and free cash flow to the firm exhibited significant volatility, characterized by a period of valuation expansion followed by a sharp compression and a subsequent rebound. While enterprise value generally trended upward for the majority of the period, the fluctuations in cash flow generation played a primary role in driving the ratio's movement.
- Enterprise Value (EV) Trends
- A consistent growth trajectory in enterprise value was observed from 2018 through 2021, with the value increasing from 38,267 million USD to a peak of 55,061 million USD. This represents a steady expansion in the overall market valuation of the entity. A slight contraction occurred in 2022, where the value decreased to 53,832 million USD.
- Free Cash Flow to the Firm (FCFF) Dynamics
- Cash flow generation remained relatively stagnant between 2018 and 2019. However, a substantial acceleration in FCFF began in 2020, culminating in a peak of 2,551 million USD in 2021. This growth phase was followed by a notable decline in 2022, with FCFF falling to 1,839 million USD, indicating a reduction in the cash available to all capital providers.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio peaked in 2019 at 38.33, reflecting a period where enterprise value grew faster than cash flow generation. A significant downward trend occurred between 2019 and 2021, with the ratio reaching its lowest point of 21.58. This compression was driven by the rapid increase in FCFF, which outpaced the growth of the enterprise value, suggesting an improvement in the entity's ability to generate cash relative to its valuation. In 2022, the ratio rose again to 29.28, a direct result of the decline in FCFF despite a relatively stable enterprise value.
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