Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Johnson Controls International plc, FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
The analysis of cash flow metrics over the six-year period from 2018 to 2023 reveals a pattern of volatility characterized by intermittent fluctuations in both operating cash flows and Free Cash Flow to the Firm (FCFF).
- Free Cash Flow to the Firm (FCFF) Trends
- FCFF exhibited significant variance, reaching a peak of 2,380 million USD in 2020 before declining to 1,723 million USD in 2022. A recovery was observed in 2023, with FCFF increasing to 1,975 million USD. The most notable contraction occurred between 2020 and 2022, representing a decrease of approximately 28% during that interval.
- Operating Cash Flow Correlation
- A strong positive correlation exists between cash provided by operating activities from continuing operations and FCFF. Operating cash flows peaked in 2021 at 2,551 million USD, while FCFF peaked slightly earlier in 2020. The dip in operating cash flow in 2019 to 1,743 million USD was mirrored by a corresponding drop in FCFF to 1,507 million USD, indicating that FCFF performance is heavily dependent on the core operating efficiency of the firm.
- Capital Expenditure and Cash Conversion
- The consistent gap between operating cash flow and FCFF indicates ongoing capital expenditures. The narrowest margin between these two figures occurred in 2020, suggesting a period of lower capital intensity or reduced investment relative to the cash generated from operations. In contrast, the wider margin observed in 2018 suggests a higher allocation of resources toward long-term assets during that fiscal year.
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Interest Paid, Net of Tax
Johnson Controls International plc, interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
2 2023 Calculation
Interest paid on short and long-term debt, tax = Interest paid on short and long-term debt × EITR
= 298 × 12.50% = 37
Between September 30, 2018, and September 30, 2023, net interest payments exhibited a V-shaped trajectory, characterized by a sustained decline followed by a moderate recovery in the latter years of the period.
- Interest Expense Trends
- A consistent downward trend in interest paid, net of tax, was observed from 2018 to 2021, with values falling from 340 million USD to a minimum of 162 million USD. This contraction was followed by a reversal beginning in 2022, as net interest costs rose to 198 million USD and further increased to 261 million USD by September 30, 2023.
- Effective Income Tax Rate (EITR) Fluctuations
- The effective income tax rate remained relatively stable, fluctuating between 12% and 18% for most of the period. A notable anomaly occurred in 2021, where the rate spiked to 33% before reverting to a consistent 12.5% for the 2022 and 2023 fiscal years.
- Impact of Tax Shield on Net Interest
- The minimum net interest payment recorded in 2021 aligns with the peak of the effective income tax rate. This suggests that the higher tax rate enhanced the tax shield, thereby reducing the net cost of interest. The subsequent increase in net interest payments in 2022 and 2023 coincided with the normalization of the tax rate to 12.5%, which diminished the net tax benefit of interest expenses.
The overall data indicates that while net interest costs were reduced significantly until 2021, the combination of a lower tax rate and potentially higher gross debt obligations led to an upward trend in net interest expenses through 2023.
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Enterprise Value to FCFF Ratio, Current
Johnson Controls International plc, current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 49,899) |
| Free cash flow to the firm (FCFF) | 1,975) |
| Valuation Ratio | |
| EV/FCFF | 25.27 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | 281.55 |
| Caterpillar Inc. | 31.92 |
| Eaton Corp. plc | 37.34 |
| GE Aerospace | 42.79 |
| Honeywell International Inc. | 15.42 |
| Lockheed Martin Corp. | 19.99 |
| RTX Corp. | 31.78 |
| EV/FCFF, Sector | |
| Capital Goods | 33.48 |
| EV/FCFF, Industry | |
| Industrials | 33.28 |
Based on: 10-K (reporting date: 2023-09-30).
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
Johnson Controls International plc, historical EV/FCFF calculation, comparison to benchmarks
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 45,986) | 53,660) | 62,765) | 39,790) | 38,054) | 42,897) | |
| Free cash flow to the firm (FCFF)2 | 1,975) | 1,723) | 2,285) | 2,380) | 1,507) | 1,871) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | 23.29 | 31.15 | 27.47 | 16.72 | 25.25 | 22.92 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| Boeing Co. | 25.63 | 37.53 | — | — | — | — | |
| Caterpillar Inc. | 16.08 | 23.54 | 20.50 | — | — | — | |
| Eaton Corp. plc | 38.49 | 33.44 | 38.16 | — | — | — | |
| GE Aerospace | 29.56 | 17.29 | 56.53 | — | — | — | |
| Honeywell International Inc. | 29.13 | 29.82 | 25.22 | — | — | — | |
| Lockheed Martin Corp. | 17.62 | 19.69 | 13.92 | — | — | — | |
| RTX Corp. | 23.86 | 28.45 | 27.29 | — | — | — | |
| EV/FCFF, Sector | |||||||
| Capital Goods | 23.34 | 25.87 | 32.16 | — | — | — | |
| EV/FCFF, Industry | |||||||
| Industrials | 25.97 | 24.33 | 28.81 | — | — | — | |
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 45,986 ÷ 1,975 = 23.29
4 Click competitor name to see calculations.
The analysis of the valuation metrics between September 2018 and September 2023 reveals significant volatility in both the enterprise value and the resulting valuation multiple relative to free cash flow. The EV/FCFF ratio experienced substantial fluctuations, reaching a peak in 2022 before contracting in 2023.
- Enterprise Value (EV) Trends
- The enterprise value exhibited a non-linear trajectory, beginning at 42,897 million USD in 2018 and dipping to 38,054 million USD in 2019. A significant expansion occurred in 2021, where the value peaked at 62,765 million USD. This was followed by a two-year downward trend, ending at 45,986 million USD in 2023, which represents a return to levels closer to those observed at the start of the analyzed period.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated inconsistent year-over-year movements. After a decline to 1,507 million USD in 2019, cash flow surged to a peak of 2,380 million USD in 2020. Despite a subsequent decline to 1,723 million USD in 2022, a recovery was noted in 2023, with FCFF rising to 1,975 million USD.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio fluctuated between a low of 16.72 in 2020 and a high of 31.15 in 2022. The lowest multiple in 2020 was driven by a combination of a lower enterprise value and peak free cash flow generation. Conversely, the peak ratio in 2022 suggests a period where the market valuation remained elevated despite a contraction in cash flow. By September 2023, the ratio compressed to 23.29, indicating a normalization of the valuation multiple in alignment with the decrease in enterprise value and the recovery in free cash flow.
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