Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Marathon Petroleum Corp., 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).
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An analysis of the financial data from 2019 to 2023 reveals a period of significant volatility followed by a strong expansion in cash generation capacity. The most notable trend is a sharp contraction in both operating cash flow and free cash flow to the firm in 2020, which was subsequently reversed by a period of aggressive growth peaking in 2022.
- Operating Cash Flow Trends
- Net cash provided by operating activities experienced a severe decline in 2020, falling from 9,441 million US dollars to 807 million US dollars. A rapid recovery ensued, with figures increasing to 8,384 million US dollars in 2021 and reaching a five-year peak of 16,319 million US dollars in 2022. A slight moderation was observed in 2023, with cash flow settling at 14,117 million US dollars.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF mirrored the volatility of operating activities, dropping from 5,066 million US dollars in 2019 to a deficit of 862 million US dollars in 2020. The subsequent recovery was substantial, with FCFF rising to 8,107 million US dollars in 2021 and ascending to 14,807 million US dollars in 2022. By 2023, FCFF remained elevated at 13,235 million US dollars, representing a significant increase over the 2019 baseline.
- Cash Conversion and Allocation Patterns
- The relationship between operating cash flow and FCFF indicates a shift in cash retention. In 2019, FCFF represented approximately 53.8% of operating cash flow. By 2022 and 2023, this proportion increased significantly, with FCFF accounting for roughly 90.7% and 93.7% of operating cash flow, respectively. This suggests that in the latter part of the period, a much higher percentage of operating cash was converted into free cash flow to the firm.
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Interest Paid, Net of Tax
Marathon Petroleum Corp., 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 paid, net of amounts capitalized, tax = Interest paid, net of amounts capitalized × EITR
= 1,200 × 20.00% = 240
3 2023 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 60 × 20.00% = 12
The financial data reveals a period of volatility regarding net interest costs and effective tax rates between 2019 and 2023. Net interest expenditures experienced a peak in 2021 before correcting in 2022 and moderately increasing in 2023. This fluctuation coincides with significant shifts in the effective income tax rate, which directly impacts the net-of-tax valuation of these expenses.
- Net Interest Paid Trends
- Interest paid, net of amounts capitalized and net of tax, showed an upward trajectory from 881 million USD in 2019 to a five-year peak of 1,120 million USD in 2021. A significant reduction occurred in 2022, with the figure dropping to 827 million USD, followed by a moderate recovery to 960 million USD by the end of 2023.
- Capitalized Interest Trends
- A general downward trajectory is observed in interest capitalized, net of tax. From a high of 119 million USD in 2019, the amount decreased to 48 million USD in 2023. This decline suggests a reduction in the volume of interest-bearing capital projects being capitalized over the analyzed five-year period.
- Effective Income Tax Rate (EITR) Influence
- The EITR exhibited substantial variance, declining from 25% in 2019 to a low of 9% in 2021, before rebounding to 22% in 2022 and settling at 20% in 2023. The convergence of the lowest tax rate (9%) and the highest net interest paid (1,120 million USD) in 2021 indicates that a diminished tax shield contributed to the increase in the net-of-tax expense during that year.
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Enterprise Value to FCFF Ratio, Current
Marathon Petroleum Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 71,226) |
| Free cash flow to the firm (FCFF) | 13,235) |
| Valuation Ratio | |
| EV/FCFF | 5.38 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Chevron Corp. | 25.76 |
| ConocoPhillips | 21.66 |
| Exxon Mobil Corp. | 28.73 |
| EV/FCFF, Sector | |
| Oil, Gas & Consumable Fuels | 19.92 |
| EV/FCFF, Industry | |
| Energy | 19.81 |
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
Marathon Petroleum Corp., 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 | 83,564) | 77,259) | 63,196) | 73,795) | 66,555) | |
| Free cash flow to the firm (FCFF)2 | 13,235) | 14,807) | 8,107) | (862) | 5,066) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 6.31 | 5.22 | 7.80 | — | 13.14 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Chevron Corp. | 14.85 | 8.27 | 13.33 | — | — | |
| ConocoPhillips | 15.38 | 7.43 | 10.72 | — | — | |
| Exxon Mobil Corp. | 12.47 | 7.84 | 10.06 | — | — | |
| EV/FCFF, Sector | ||||||
| Oil, Gas & Consumable Fuels | 13.63 | 7.91 | 11.15 | — | — | |
| EV/FCFF, Industry | ||||||
| Energy | 13.96 | 8.54 | 11.54 | — | — | |
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
= 83,564 ÷ 13,235 = 6.31
4 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a significant expansion in cash flow generation relative to the growth in enterprise value. While the entity's overall valuation has trended upward, the substantial increase in free cash flow to the firm has resulted in a marked compression of the EV/FCFF multiple.
- Enterprise Value (EV) Trajectory
- The enterprise value demonstrated a general upward trend, rising from US$ 66,555 million in 2019 to US$ 83,564 million in 2023. A temporary contraction occurred in 2021, where the value dipped to US$ 63,196 million, before recovering and reaching its peak at the end of the analyzed period.
- Free Cash Flow to the Firm (FCFF) Volatility
- FCFF exhibited high volatility, moving from US$ 5,066 million in 2019 to a negative position of US$ 862 million in 2020. This was followed by a period of rapid growth, with cash flows surging to US$ 8,107 million in 2021 and peaking at US$ 14,807 million in 2022. A moderate decline was observed in 2023, with FCFF ending at US$ 13,235 million.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio underwent a sharp decline from 13.14 in 2019 to 5.22 in 2022, indicating that the growth in cash flow generation significantly outpaced the growth in enterprise value. The ratio slightly increased to 6.31 in 2023, reflecting the minor dip in FCFF and the continued rise in EV. The overall trend suggests a substantial improvement in the firm's ability to generate cash relative to its total valuation compared to the 2019 baseline.
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