Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Mastercard 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).
- Operating Cash Flow Trend
- The net cash provided by operating activities demonstrated a generally positive trend over the five-year period. Starting from 6,223 million US dollars at the end of 2018, it increased significantly to 8,183 million in 2019. Although there was a slight decline in 2020 to 7,224 million, the value rebounded strongly in subsequent years, reaching 9,463 million in 2021 and then climbing further to 11,195 million by the end of 2022. This overall upward trajectory suggests improved operational efficiency or increased earnings quality over time.
- Free Cash Flow to the Firm (FCFF) Trend
- The free cash flow to the firm exhibited a pattern closely aligned with the net operating cash flow. Beginning at 5,844 million US dollars in 2018, FCFF increased to 7,620 million in 2019 but then experienced a dip to 6,773 million in 2020. Following the same pattern as operating cash flow, FCFF rose substantially in 2021, reaching 8,985 million, and continued to grow to 10,448 million by the end of 2022. This trend indicates consistent growth in the company’s ability to generate cash after accounting for capital expenditures.
- Insights on Cash Flow Performance
- The fluctuations observed in both operating cash flow and FCFF in 2020 may possibly be attributed to external market or economic factors affecting performance during that year. However, the robust recovery in 2021 and further growth in 2022 indicate strong cash generation capabilities and effective management of operational and investment activities. The parallel movements in operating cash flow and FCFF underscore the company’s ability to maintain healthy cash flows after operational costs and necessary capital investments.
Interest Paid, Net of Tax
Mastercard 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
Cash paid for interest, tax = Cash paid for interest × EITR
= 414 × 15.40% = 64
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited a gradual decline over the five-year period. Beginning at 18.5% in 2018, the rate decreased to 16.9% in 2019, followed by a slight increase to 17.4% in 2020. Subsequently, it continued a downward trajectory, reaching 15.7% in 2021 and further decreasing to 15.4% in 2022. This trend indicates a modest improvement in tax efficiency or changes in tax regulations favorable to the company.
- Cash Paid for Interest, Net of Tax
- The cash paid for interest, net of tax, showed a consistent upward trend throughout the period. Starting at $125 million in 2018, it increased to $165 million in 2019, then rose significantly to $257 million in 2020. The amount continued to climb to $336 million in 2021 and reached $350 million in 2022. This steady increase may reflect greater debt levels, rising interest rates, or changes in financing structure resulting in higher interest expenses.
Enterprise Value to FCFF Ratio, Current
Mastercard Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 358,700) |
| Free cash flow to the firm (FCFF) | 10,448) |
| Valuation Ratio | |
| EV/FCFF | 34.33 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Accenture PLC | 19.91 |
| Adobe Inc. | 19.01 |
| Cadence Design Systems Inc. | 75.79 |
| CrowdStrike Holdings Inc. | 106.58 |
| Fair Isaac Corp. | 58.27 |
| International Business Machines Corp. | 21.87 |
| Intuit Inc. | 43.86 |
| Microsoft Corp. | 58.66 |
| Oracle Corp. | 284.80 |
| Palantir Technologies Inc. | 289.34 |
| Palo Alto Networks Inc. | 39.72 |
| Salesforce Inc. | 19.15 |
| ServiceNow Inc. | 56.00 |
| Synopsys Inc. | 64.41 |
| Workday Inc. | 23.95 |
| EV/FCFF, Sector | |
| Software & Services | 57.06 |
| EV/FCFF, Industry | |
| Information Technology | 56.28 |
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
Mastercard 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 | 357,178) | 365,060) | 338,628) | 341,613) | 222,600) | |
| Free cash flow to the firm (FCFF)2 | 10,448) | 8,985) | 6,773) | 7,620) | 5,844) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 34.19 | 40.63 | 50.00 | 44.83 | 38.09 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Accenture PLC | 16.99 | 24.76 | 17.90 | 18.49 | — | |
| Adobe Inc. | 20.82 | 33.61 | 40.43 | 40.48 | — | |
| Cadence Design Systems Inc. | 44.54 | 35.05 | 44.13 | — | — | |
| CrowdStrike Holdings Inc. | 96.35 | 141.44 | 807.14 | — | — | |
| Fair Isaac Corp. | 23.33 | 26.12 | 37.52 | 38.81 | — | |
| International Business Machines Corp. | 16.47 | 13.10 | 9.35 | — | — | |
| Intuit Inc. | 32.85 | 48.64 | 37.90 | 33.30 | — | |
| Microsoft Corp. | 32.31 | 38.37 | 33.99 | 26.37 | — | |
| Oracle Corp. | 31.60 | 16.36 | 14.99 | — | — | |
| Palantir Technologies Inc. | 82.97 | 66.45 | — | — | — | |
| Palo Alto Networks Inc. | 29.30 | 32.74 | 26.50 | 20.44 | — | |
| Salesforce Inc. | 35.97 | 44.91 | 39.63 | — | — | |
| ServiceNow Inc. | 40.86 | 60.13 | 83.74 | — | — | |
| Synopsys Inc. | 30.82 | 38.59 | 42.88 | 33.32 | — | |
| Workday Inc. | 45.74 | 57.52 | 72.44 | — | — | |
| EV/FCFF, Sector | ||||||
| Software & Services | 29.81 | 32.52 | 28.14 | — | — | |
| EV/FCFF, Industry | ||||||
| Information Technology | 26.67 | 27.51 | 23.95 | — | — | |
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
= 357,178 ÷ 10,448 = 34.19
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value exhibited a general upward trend from 2018 to 2021, increasing from 222,600 million US dollars in 2018 to a peak of 365,060 million US dollars in 2021. However, there was a slight decline in 2022, reducing to 357,178 million US dollars.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm demonstrated a positive growth trajectory over the entire period under review, starting at 5,844 million US dollars in 2018 and rising consistently to reach 10,448 million US dollars by the end of 2022. There was a minor dip observed in 2020 compared to the previous year, but overall growth resumed strongly thereafter.
- EV/FCFF Ratio
- This ratio experienced fluctuations throughout the observed period. It increased from 38.09 in 2018 to a high of 50 in 2020, indicating that enterprise value grew disproportionately relative to the free cash flow. From 2020 onward, the ratio decreased significantly, falling to 34.19 in 2022, which suggests that either the enterprise value declined or free cash flow increased at a higher rate, reflecting potentially improved firm valuation relative to cash flow generation.
- Summary Insight
- Overall, the enterprise value and free cash flow trends reflect steady growth with some volatility. The initial rise in the EV/FCFF ratio up to 2020 indicates a period where valuation outpaced cash flow growth. The subsequent decline in the ratio suggests a rebalancing, where cash flow growth has caught up or enterprise value has slightly contracted, pointing to potentially enhanced operational efficiency or market reassessment during the most recent years.