Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Kimberly-Clark Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
The financial trajectory between 2016 and 2020 is characterized by a period of contraction followed by a significant recovery in the final year. Both cash provided by operations and free cash flow to the firm (FCFF) exhibited a general downward trend from 2016 through 2019 before experiencing a sharp rebound in 2020.
- Cash Provided by Operations
- Operating cash flow decreased from 3,232 million US$ in 2016 to a period low of 2,736 million US$ in 2019. This decline was non-linear, with a slight stabilization observed in 2018 at 2,970 million US$. However, 2020 marked a substantial increase to 3,729 million US$, representing the highest operational cash generation within the five-year window.
- Free Cash Flow to the Firm (FCFF)
- FCFF demonstrated a more consistent and pronounced decline over the first four years, falling from 2,703 million US$ in 2016 to 1,969 million US$ in 2019. This downward trend indicates a sustained reduction in the cash available to all capital providers during this interval. This trend reversed sharply in 2020, with FCFF rising to 2,731 million US$, effectively recovering most of the losses incurred since 2016.
- Analysis of Cash Flow Variance
- The divergence between cash provided by operations and FCFF expanded progressively over the period. The variance stood at 529 million US$ in both 2016 and 2017, but widened to 767 million US$ in 2019 and reached a peak of 998 million US$ in 2020. This widening gap suggests an increasing commitment of operating cash toward capital expenditures or other firm-level investments, particularly in the final year of the analysis.
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Interest Paid, Net of Tax
Kimberly-Clark Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
2 2020 Calculation
Interest paid, tax = Interest paid × EITR
= 245 × 23.10% = 57
An analysis of the financial data from 2016 to 2020 reveals a general reduction in net interest expenditures and a fluctuating effective income tax rate, with a significant shift occurring around 2018.
- Effective Income Tax Rate (EITR) Trends
- The EITR exhibited a marked downward trajectory between 2016 and 2018, decreasing from 30.60% to a period low of 19.60%. Following this decline, the rate experienced a moderate recovery over the subsequent two years, rising to 21.70% in 2019 and reaching 23.10% by December 31, 2020.
- Interest Paid, Net of Tax Analysis
- Net interest payments peaked in 2017 at US$ 253 million. Following this peak, a consistent downward trend was observed over the remaining three years, with expenses falling to US$ 212 million in 2018, US$ 200 million in 2019, and concluding at US$ 188 million in 2020.
- Correlation and Financial Implications
- A divergence is observed between 2018 and 2020; while the effective income tax rate increased, the net interest paid continued to decline. This suggests that the reduction in net interest costs during this period was primarily driven by a decrease in gross interest obligations or a reduction in total debt, rather than being a result of tax-shield efficiencies.
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Enterprise Value to FCFF Ratio, Current
Kimberly-Clark Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 52,882) |
| Free cash flow to the firm (FCFF) | 2,731) |
| Valuation Ratio | |
| EV/FCFF | 19.36 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Procter & Gamble Co. | 23.06 |
Based on: 10-K (reporting date: 2020-12-31).
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
Kimberly-Clark Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 52,998) | 57,004) | 46,202) | 46,232) | 50,665) | |
| Free cash flow to the firm (FCFF)2 | 2,731) | 1,969) | 2,356) | 2,400) | 2,703) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 19.40 | 28.96 | 19.61 | 19.26 | 18.75 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
3 2020 Calculation
EV/FCFF = EV ÷ FCFF
= 52,998 ÷ 2,731 = 19.40
4 Click competitor name to see calculations.
The financial trajectory of the enterprise value to free cash flow to the firm (EV/FCFF) ratio between 2016 and 2020 is characterized by a period of relative stability, a significant valuation spike in 2019, and a subsequent normalization in 2020.
- Enterprise Value Trends
- Enterprise value experienced a moderate decline from 50,665 million US dollars in 2016 to approximately 46,200 million US dollars by 2018. A sharp increase followed in 2019, where the value peaked at 57,004 million US dollars, before contracting to 52,998 million US dollars in 2020.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated a consistent downward trend from 2016 through 2019, falling from 2,703 million US dollars to a period low of 1,969 million US dollars. This decline was reversed in 2020, with FCFF rebounding strongly to 2,731 million US dollars, representing the highest cash flow generation within the analyzed timeframe.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio remained stable between 18.75 and 19.61 from 2016 to 2018. A notable anomaly occurred in 2019, as the ratio surged to 28.96. This spike was driven by the convergence of the period's highest enterprise value and its lowest free cash flow. By 2020, the ratio corrected to 19.40, returning to historical norms as FCFF recovered and the enterprise value decreased.
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