Enterprise Value to FCFF (EV/FCFF)
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McKesson Corp. pages available for free this week:
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Free Cash Flow to The Firm (FCFF)
McKesson Corp., FCFF calculation
US$ in millions
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).
- 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.
Interest Paid, Net of Tax
McKesson Corp., interest paid, net of tax calculation
US$ in millions
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 × ÷ =
2 2016 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= × =
- 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.
Enterprise Value to FCFF Ratio, Current
McKesson 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 | |
| Abbott Laboratories | |
| Elevance Health Inc. | |
| Intuitive Surgical Inc. | |
| Medtronic PLC | |
| UnitedHealth Group Inc. | |
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.
Enterprise Value to FCFF Ratio, Historical
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 | |||||||
| Free cash flow to the firm (FCFF)2 | |||||||
| Valuation Ratio | |||||||
| EV/FCFF3 | |||||||
| 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).
3 2016 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
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.