Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
International Business Machines Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
1, 2 See details »
- Net Cash Provided by Operating Activities
- The net cash provided by operating activities demonstrates a fluctuating trend over the five-year period. It starts at a high point of 18,197 million USD in 2020, subsequently decreasing to 12,796 million USD in 2021 and further declining to 10,435 million USD in 2022. There is a notable recovery in 2023, with cash flow increasing to 13,931 million USD, followed by a slight decline to 13,445 million USD in 2024. Overall, the operating cash flow shows volatility with a significant dip between 2020 and 2022, before partially recovering in the subsequent years.
- Free Cash Flow to the Firm (FCFF)
- The FCFF closely mirrors the pattern observed in net cash from operating activities, indicating a similar trend in the company’s ability to generate cash after capital expenditures. The FCFF starts at 16,605 million USD in 2020 and then decreases consistently over the next two years to 11,885 million USD in 2021 and 9,685 million USD in 2022. A marked improvement occurs in 2023, with FCFF rising to 13,884 million USD and maintaining stability into 2024 at 13,889 million USD. The data reflects a recovery phase after a period of contraction in free cash flows from 2020 through 2022.
Interest Paid, Net of Tax
International Business Machines Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
2 2024 Calculation
Interest paid on debt, tax = Interest paid on debt × EITR
= 1,978 × 21.00% = 415
3 2024 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 12 × 21.00% = 3
- Effective income tax rate (EITR)
- The effective income tax rate exhibits notable fluctuations over the observed five-year period. It starts at 21% in 2020, significantly drops to 3% in 2021, then returns to 21% in 2022. In 2023, it decreases slightly to 14%, before rising again to 21% in 2024. This pattern suggests variability in tax strategies or changes in taxable income components affecting the rate year over year.
- Interest paid on debt, net of tax (US$ in millions)
- Interest paid on debt, net of tax, shows a fluctuating trend with a general increase towards the end of the period. The value starts at $1,446 million in 2020, marginally increases to $1,467 million in 2021, then declines to $1,107 million in 2022. Subsequently, it rises again to $1,434 million in 2023 and reaches its highest point at $1,563 million in 2024. These changes may reflect varying levels of debt outstanding or interest rate movements impacting interest expenses.
- Interest capitalized, net of tax (US$ in millions)
- Interest capitalized, net of tax, remains comparatively low in absolute terms but shows a gradual increasing trend. Beginning at $5 million in 2020, it decreases slightly to $3 million in 2021, then rises to $4 million in 2022. The upward trajectory becomes more pronounced with values of $8 million in 2023 and $9 million in 2024. This trend indicates an increasing amount of interest expense being capitalized, potentially reflecting higher capital expenditures or investments requiring capitalization of borrowing costs.
Enterprise Value to FCFF Ratio, Current
International Business Machines Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 311,610) |
| Free cash flow to the firm (FCFF) | 13,889) |
| Valuation Ratio | |
| EV/FCFF | 22.44 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Accenture PLC | 21.62 |
| Adobe Inc. | 19.86 |
| Cadence Design Systems Inc. | 77.27 |
| CrowdStrike Holdings Inc. | 114.77 |
| Fair Isaac Corp. | 69.39 |
| Intuit Inc. | 45.77 |
| Microsoft Corp. | 58.14 |
| Oracle Corp. | 292.18 |
| Palantir Technologies Inc. | 273.34 |
| Palo Alto Networks Inc. | 42.82 |
| Salesforce Inc. | 20.21 |
| ServiceNow Inc. | 62.46 |
| Synopsys Inc. | 63.14 |
| Workday Inc. | 26.11 |
| EV/FCFF, Sector | |
| Software & Services | 48.28 |
| EV/FCFF, Industry | |
| Information Technology | 50.80 |
Based on: 10-K (reporting date: 2024-12-31).
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
International Business Machines Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 279,256) | 211,965) | 159,474) | 155,684) | 155,259) | |
| Free cash flow to the firm (FCFF)2 | 13,889) | 13,884) | 9,685) | 11,885) | 16,605) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 20.11 | 15.27 | 16.47 | 13.10 | 9.35 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Accenture PLC | 25.76 | 20.26 | 16.99 | 24.76 | 17.90 | |
| Adobe Inc. | 21.98 | 37.75 | 20.82 | 33.61 | 40.43 | |
| Cadence Design Systems Inc. | 61.26 | 63.83 | 44.54 | 35.05 | 44.13 | |
| CrowdStrike Holdings Inc. | 81.46 | 38.65 | 96.35 | 141.44 | 807.14 | |
| Fair Isaac Corp. | 77.83 | 46.25 | 23.33 | 26.12 | 37.52 | |
| Intuit Inc. | 36.79 | 31.28 | 32.85 | 48.64 | 37.90 | |
| Microsoft Corp. | 49.30 | 41.75 | 32.31 | 38.37 | 33.99 | |
| Oracle Corp. | 31.24 | 35.83 | 31.60 | 16.36 | 14.99 | |
| Palantir Technologies Inc. | 251.61 | 69.13 | 82.97 | 66.45 | — | |
| Palo Alto Networks Inc. | 34.69 | 28.15 | 29.30 | 32.74 | 26.50 | |
| Salesforce Inc. | 29.95 | 28.41 | 35.97 | 44.91 | 39.63 | |
| ServiceNow Inc. | 60.21 | 56.55 | 40.86 | 60.13 | 83.74 | |
| Synopsys Inc. | 56.23 | 55.87 | 30.82 | 38.59 | 42.88 | |
| Workday Inc. | 32.57 | 33.40 | 45.74 | 57.52 | 72.44 | |
| EV/FCFF, Sector | ||||||
| Software & Services | 41.40 | 35.81 | 29.81 | 32.52 | 28.14 | |
| EV/FCFF, Industry | ||||||
| Information Technology | 40.41 | 34.37 | 26.67 | 27.51 | 23.95 | |
Based on: 10-K (reporting date: 2024-12-31), 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).
3 2024 Calculation
EV/FCFF = EV ÷ FCFF
= 279,256 ÷ 13,889 = 20.11
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value displayed a consistent upward trajectory over the analyzed period. It started at approximately $155.3 billion at the end of 2020 and remained relatively flat into 2021 before gradually increasing to about $159.5 billion in 2022. A more pronounced growth occurred in the subsequent years, reaching approximately $212.0 billion in 2023 and culminating at $279.3 billion by the end of 2024. This reflects a substantial increase, particularly in the last two years, indicating a growing market valuation or increased debt and equity financing.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow exhibited a declining trend initially, dropping from $16.6 billion in 2020 to $11.9 billion in 2021 and further to $9.7 billion in 2022. However, there was a rebound in 2023, with FCFF rising to $13.9 billion and then stabilizing around the same level at the end of 2024. This pattern suggests an initial reduction in the firm's cash-generating capability, followed by partial recovery and stabilization in later years.
- EV to FCFF Ratio
- The EV/FCFF ratio increased steadily over the entire period, starting from a ratio of 9.35 in 2020 and rising to 13.1 in 2021, then sharply increasing to 16.47 in 2022. Although a slight decline to 15.27 occurred in 2023, the ratio surged again to 20.11 in 2024. The upward trend of this ratio indicates that the enterprise value is growing faster than the free cash flow, implying higher valuation multiples and potentially higher market expectations or reduced cash flow generation relative to the firm's value.
- Overall Interpretation
- The data reveals growing market valuation as reflected in increasing enterprise value, accompanied by a drop and subsequent stabilization in free cash flow. The rising EV/FCFF ratio suggests that the company’s valuation relative to its cash flow has expanded considerably. This might reflect investor optimism, strategic investments increasing perceived value, or pressure on cash flow generation that investors expect will improve in the future. Close attention should be paid to the sustainability of cash flow improvements given the increasing valuation multiples.