Enterprise Value to FCFF (EV/FCFF)
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McDonald’s Corp. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Free Cash Flow to The Firm (FCFF)
McDonald’s 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 »
- Cash Provided by Operations
- There is an overall upward trend in cash provided by operations over the five-year period, starting at $6,265 million in 2020 and reaching $9,447 million in 2024. The values demonstrate some fluctuation within the period, notably a dip from $9,142 million in 2021 to $7,387 million in 2022, followed by a significant increase to $9,612 million in 2023. This suggests periodic volatility but generally improving operational cash generation capacity.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm shows a pattern that generally mirrors the trend in operational cash flow. It starts at $5,504 million in 2020, rises sharply to $8,097 million in 2021, then decreases to $6,429 million in 2022. After this decline, FCFF increases again to $8,302 million in 2023 before slightly falling to $7,900 million in 2024. The fluctuations in FCFF align closely with those in cash from operations, indicating consistent capital expenditure patterns relative to operational performance.
- Comparative Insights
- Throughout the period, free cash flow to the firm remains consistently lower than cash provided by operations, which is expected due to capital expenditures and other investments. Both metrics show resilience with recovery following dips, implying effective management of operational activities and investment outflows. The overall trend suggests strengthening cash generation abilities and sustainable free cash flow, although some volatility points to external or internal factors influencing annual performance.
Interest Paid, Net of Tax
McDonald’s Corp., interest paid, net of tax calculation
US$ 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, tax = Interest paid × EITR
= × =
3 2024 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= × =
- Effective Income Tax Rate (EITR) (%)
- The effective income tax rate exhibited fluctuations over the five-year period. It started at 23% in 2020, decreased significantly to 17.3% in 2021, then increased to 21.1% in 2022. It slightly declined to 19.5% in 2023 and rose again to 20.5% by 2024. Overall, the tax rate demonstrated variability, with no consistent upward or downward trend, but generally remained below the initial 2020 level after 2020.
- Interest Paid, Net of Tax (US$ in millions)
- Interest expenses increased steadily throughout the observed period. Beginning at $875 million in 2020, interest payments rose to $990 million in 2021. Although there was a minor decline to $934 million in 2022, the amount increased substantially thereafter, reaching $1,036 million in 2023 and further climbing to $1,211 million in 2024. This indicates a trend of growing interest obligations net of tax in recent years, possibly reflecting increased borrowing or rising interest rates.
- Capitalized Interest, Net of Tax (US$ in millions)
- Capitalized interest displayed a clear upward trajectory. The values started at a modest $5 million in 2020 and gradually increased each year, reaching $6 million in 2021, $7 million in 2022, then experiencing more pronounced growth to $12 million in 2023, and $17 million in 2024. This trend suggests an increasing amount of interest costs being capitalized, potentially indicating higher capital investments or changes in accounting policy regarding interest capitalization.
Enterprise Value to FCFF Ratio, Current
McDonald’s Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Airbnb Inc. | |
| Booking Holdings Inc. | |
| Chipotle Mexican Grill Inc. | |
| Starbucks Corp. | |
| EV/FCFF, Sector | |
| Consumer Services | |
| EV/FCFF, Industry | |
| Consumer Discretionary | |
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
McDonald’s 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 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| Starbucks Corp. | ||||||
| EV/FCFF, Sector | ||||||
| Consumer Services | ||||||
| EV/FCFF, Industry | ||||||
| Consumer Discretionary | ||||||
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
= ÷ =
4 Click competitor name to see calculations.
- Enterprise value (EV)
- The enterprise value demonstrated a consistent upward trend over the five-year period. It increased from approximately 191.5 billion US dollars at the end of 2020 to about 261.1 billion US dollars by the end of 2024. This represents a gradual annual increase, indicating a growing market valuation or increased capitalization of the firm.
- Free cash flow to the firm (FCFF)
- Free cash flow to the firm exhibited some volatility during the examined period. It started at 5.5 billion US dollars in 2020, followed by a notable increase to approximately 8.1 billion in 2021. However, FCFF declined to 6.4 billion in 2022 before increasing again to 8.3 billion in 2023. In 2024, a slight decrease to 7.9 billion was observed. Overall, the FCFF reflected fluctuating operational cash generation capacity but maintained a generally higher level compared to the initial year.
- EV/FCFF Ratio
- The EV/FCFF ratio showed considerable variation throughout the timeframe. It started at a relatively high ratio of 34.8 in 2020, dropped to 26.3 in 2021, which suggests a temporary improvement in valuation relative to cash flow. Thereafter, it increased sharply to 35.4 in 2022, declined to 30.1 in 2023, and rose again to 33.0 by 2024. This pattern indicates fluctuating investor sentiment or valuation multiples in relation to the company's free cash flow, reflecting varying perceptions of risk, growth prospects, or capital efficiency.
- Overall Observations
- The data reveals steady growth in enterprise value alongside more erratic free cash flow generation. The volatility in FCFF coupled with the fluctuating EV/FCFF ratio suggests that while the firm's market valuation has been robust, the underlying cash flow performance experienced periods of inconsistency. This may imply challenges or changes in operational efficiency or external market conditions impacting cash flow. The EV/FCFF ratio variations point to changing market valuations relative to the firm's cash flow, potentially driven by shifts in investor expectations or broader economic conditions.