Price to FCFE (P/FCFE)
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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 Equity (FCFE)
McKesson Corp., FCFE 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).
The financial data reveals several notable trends in the cash flow performance over the analyzed periods.
- Net Cash Provided by Operating Activities
- There is a generally positive upward trend in net cash provided by operating activities, increasing from $2,338 million in 2011 to $3,672 million in 2016. Despite some fluctuations, the overall growth suggests an improvement in the company's core operational cash generation capacity over these years. The figure peaked in 2016 at its highest level within the given timeframe.
- Free Cash Flow to Equity (FCFE)
- The FCFE shows more volatility when compared to net operating cash flows. It began at $1,909 million in 2011 and rose to a high of $6,498 million in 2014, indicating a significant surge in cash available to shareholders during that year. However, subsequent years demonstrate a sharp decline, with FCFE falling back to $2,165 million in 2015 and further down to $1,270 million in 2016. This drop may indicate increased capital expenditures, debt repayments, or other uses of cash reducing the amount available to equity holders.
- Comparative Analysis and Observations
- While operating cash flows show steady improvement, the free cash flow available to equity holders is less consistent. The sharp increase in FCFE in 2014 followed by the decline in subsequent years may reflect strategic investments or changes in financial policy that affected cash distribution. The divergence between steadily rising operating cash flow and fluctuating FCFE warrants further investigation into capital structure changes or investment activities that impact discretionary cash flow.
Price to FCFE Ratio, Current
McKesson Corp., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | |
| FCFE per share | |
| Current share price (P) | |
| Valuation Ratio | |
| P/FCFE | |
| Benchmarks | |
| P/FCFE, 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 P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
McKesson Corp., historical P/FCFE calculation, comparison to benchmarks
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | ||
|---|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | |||||||
| Selected Financial Data (US$) | |||||||
| Free cash flow to equity (FCFE) (in millions)2 | |||||||
| FCFE per share3 | |||||||
| Share price1, 4 | |||||||
| Valuation Ratio | |||||||
| P/FCFE5 | |||||||
| Benchmarks | |||||||
| P/FCFE, Competitors6 | |||||||
| 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 Data adjusted for splits and stock dividends.
3 2016 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= ÷ =
4 Closing price as at the filing date of McKesson Corp. Annual Report.
5 2016 Calculation
P/FCFE = Share price ÷ FCFE per share
= ÷ =
6 Click competitor name to see calculations.
- Share Price Trend
- The share price exhibited a notable upward trend from 2011 to 2015, increasing from $82.84 to a peak of $229.55. In 2016, the share price declined significantly to $172.70, marking a reversal after several years of growth.
- FCFE per Share Trend
- Free Cash Flow to Equity (FCFE) per share showed variability throughout the period. Beginning at $7.57 in 2011, FCFE per share rose steadily to $28.18 in 2014, which represents the highest value in the series. Subsequently, there was a marked decline to $9.35 in 2015 and a further decrease to $5.64 in 2016.
- P/FCFE Ratio Analysis
- The Price to FCFE ratio fluctuated considerably over the years. It decreased from 10.94 in 2011 to 6.32 in 2014, indicating that the share price was relatively low compared to FCFE in that year. However, in 2015 and 2016, the ratio increased sharply to 24.55 and then to 30.60, respectively, suggesting that the share price was high relative to the FCFE per share in the later years.
- Overall Insights
- The relationship between share price and FCFE per share reveals a potential disconnect in 2015 and 2016. Despite a substantial drop in FCFE per share during these years, the share price remained relatively elevated, leading to a significant increase in the P/FCFE ratio. This may indicate a market expectation of future growth or other factors inflating the share price despite reduced cash flows to equity. The sharp decline in share price in 2016 partially corrected this disparity but did not align FCFE and share price levels to the same extent as in earlier years.