McKesson Corp., FCFF calculation

US$ in millions

12 months ended:	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Net income attributable to McKesson Corporation	2,258)	1,476)	1,263)	1,338)	1,403)	1,202)
Net (income) loss attributable to noncontrolling interests	52)	67)	(5)	—)	—)	—)
Net noncash charges	1,466)	2,179)	1,370)	1,108)	1,087)	834)
Changes in operating assets and liabilities, net of acquisitions	(104)	(610)	508)	37)	460)	302)
Net cash provided by operating activities	3,672)	3,112)	3,136)	2,483)	2,950)	2,338)
Cash paid for interest, net of tax¹	243)	249)	165)	144)	167)	169)
Payments for property, plant and equipment	(488)	(376)	(278)	(246)	(225)	(233)
Capitalized software expenditures	(189)	(169)	(141)	(160)	(178)	(155)
Free cash flow to the firm (FCFF)	3,238)	2,816)	2,882)	2,221)	2,714)	2,119)

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

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Net cash provided by operating activities: The net cash generated from operating activities shows an overall upward trend over the observed six-year period. Starting at 2,338 million US dollars in 2011, it increased to 3,672 million US dollars by 2016. Notable fluctuations are present, with a peak in 2014 at 3,136 million US dollars, a slight dip in 2015 to 3,112 million, followed by a substantial rise in 2016. This pattern indicates generally improving operational cash generation capabilities, despite minor year-to-year volatility.
Free cash flow to the firm (FCFF): Free cash flow to the firm follows a similar upward trajectory. It started at 2,119 million US dollars in 2011, increased to 3,238 million US dollars in 2016, indicating improved cash availability after capital expenditures. The trend shows consistent growth, with a peak in 2014 at 2,882 million, a slight decrease in 2015, and a rebound in 2016. The parallel movement with operating cash flow suggests effective capital management alongside operational performance.
Overall insights: Both cash flow metrics demonstrate sustained growth across the period, reflecting strengthening liquidity and financial flexibility. The close correlation between net operating cash flow and FCFF implies stable capital investment requirements relative to operational cash generation. Minor fluctuations during 2013 to 2015 warrant monitoring but do not detract from the positive multi-year trend. These patterns suggest effective management of cash flows contributing to the firm's financial health.

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McKesson Corp., interest paid, net of tax calculation

US$ in millions

12 months ended:	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Earnings before tax (EBT)
Net income attributable to McKesson Corporation	2,258)	1,476)	1,263)	1,338)	1,403)	1,202)
Add: Net income attributable to noncontrolling interest	52)	67)	(5)	—)	—)	—)
Less: Income (loss) from discontinued operations, net of tax	(32)	(299)	(96)	—)	—)	72)
Add: Income tax expense	908)	815)	742)	581)	516)	505)
EBT	3,250)	2,657)	2,096)	1,919)	1,919)	1,635)
Effective Income Tax Rate (EITR)
EITR¹	27.94%	30.67%	35.40%	30.28%	26.89%	30.89%
Interest Paid, Net of Tax
Cash paid for interest, before tax	337)	359)	255)	207)	228)	244)
Less: Cash paid for interest, tax²	94)	110)	90)	63)	61)	75)
Cash paid for interest, net of tax	243)	249)	165)	144)	167)	169)

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

¹ 2016 Calculation
EITR = 100 × Income tax expense ÷ EBT
= 100 × 908 ÷ 3,250 = 27.94%

² 2016 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= 337 × 27.94% = 94

Effective Income Tax Rate (EITR): The effective income tax rate demonstrated variability over the six-year period. Initially, it was 30.89% in 2011, decreased to 26.89% in 2012, then increased again in 2013 to 30.28%. The rate reached a peak of 35.4% in 2014 before declining to 30.67% in 2015 and further to 27.94% in 2016. This suggests fluctuations in tax strategy, tax regulations, or profitability distribution across years.
Cash Paid for Interest, Net of Tax: The cash paid for interest, net of tax, remained relatively stable between 2011 and 2014, fluctuating around the 144 to 169 million USD range. However, there was a notable increase in 2015 to 249 million USD, which slightly decreased to 243 million USD in 2016. This upward trend from 2014 to 2015 indicates a possible increase in debt levels, interest rates, or refinancing activities during that timeframe.

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McKesson Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in millions)
Enterprise value (EV)	40,477)
Free cash flow to the firm (FCFF)	3,238)
Valuation Ratio
EV/FCFF	12.50
Benchmarks
EV/FCFF, Competitors¹
Abbott Laboratories	35.24
Elevance Health Inc.	12.35
Intuitive Surgical Inc.	116.83
Medtronic PLC	24.46
UnitedHealth Group Inc.	15.22

Based on: 10-K (reporting date: 2016-03-31).

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.

McKesson Corp., historical EV/FCFF calculation, comparison to benchmarks

	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Selected Financial Data (US$ in millions)
Enterprise value (EV)¹	43,051)	57,740)	49,411)	27,034)	22,057)	21,278)
Free cash flow to the firm (FCFF)²	3,238)	2,816)	2,882)	2,221)	2,714)	2,119)
Valuation Ratio
EV/FCFF³	13.30	20.51	17.15	12.17	8.13	10.04
Benchmarks
EV/FCFF, Competitors⁴
Abbott Laboratories	—	—	—	—	—	—
Elevance Health Inc.	—	—	—	—	—	—
Intuitive Surgical Inc.	—	—	—	—	—	—
Medtronic PLC	—	—	—	—	—	—
UnitedHealth Group Inc.	—	—	—	—	—	—

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

¹ See details »

² See details »

³ 2016 Calculation
EV/FCFF = EV ÷ FCFF
= 43,051 ÷ 3,238 = 13.30

⁴ Click competitor name to see calculations.

Enterprise Value (EV): The enterprise value exhibited a consistent upward trend from 2011 to 2015, increasing from 21,278 million US dollars to a peak of 57,740 million US dollars. This represents a significant growth of approximately 171% over the five-year period. However, in 2016, the enterprise value declined notably to 43,051 million US dollars, suggesting a reversal in the previous growth trend.
Free Cash Flow to the Firm (FCFF): Free cash flow to the firm showed overall growth during the same period. Starting at 2,119 million US dollars in 2011, FCFF increased to 2,714 million US dollars in 2012. Though there was a dip in 2013 down to 2,221 million US dollars, the figure rebounded in subsequent years, reaching 3,238 million US dollars by 2016. This indicates improved cash generation capability despite some volatility.
EV/FCFF Ratio: The ratio of enterprise value to free cash flow to the firm fluctuated considerably. It started at 10.04 in 2011 and decreased to a low of 8.13 in 2012, reflecting a more favorable valuation relative to cash flow. However, the ratio increased sharply from 2013 onwards, reaching a high of 20.51 in 2015, which indicates that the market value was high relative to free cash flow during this period. In 2016, the ratio declined to 13.3, suggesting a partial correction towards a more balanced valuation.
Overall Analysis: The data reveals substantial growth in enterprise value and free cash flow over the six years, with a more pronounced rise in market valuation leading up to 2015. The divergence between EV and FCFF in certain years, especially the elevated EV/FCFF ratio in 2014 and 2015, points to possibly heightened market expectations or strategic investments that increased value disproportionately to cash flow. The decrease in enterprise value coupled with an improving free cash flow in 2016 may imply a market reassessment or external factors affecting valuation. The EV/FCFF ratio's volatility underscores fluctuating market sentiment and potential reevaluation of the firm’s cash generating prospects.

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McKesson Corp. (NYSE:MCK)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical