Enterprise Value to FCFF (EV/FCFF)
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Merck & Co. Inc. pages available for free this week:
- Balance Sheet: Assets
- Cash Flow Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
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Free Cash Flow to The Firm (FCFF)
Merck & Co. Inc., 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).
- Net cash provided by operating activities
- The net cash provided by operating activities exhibits a fluctuating trend over the observed periods. Starting at $10,253 million in 2020, it increased significantly to $13,122 million in 2021 and then to a peak of $19,095 million in 2022. However, in 2023, there was a notable decline to $13,006 million, before rising again to a new high of $21,468 million in 2024. This indicates variability in the company's operational cash generation capability, with marked improvements following declines.
- Free cash flow to the firm (FCFF)
- Free cash flow to the firm follows a pattern similar to net cash provided by operating activities, suggesting a relationship between operating cash flows and free cash flow generation. Starting at $6,232 million in 2020, FCFF increased considerably to $9,367 million in 2021 and then surged to $15,534 million in 2022. It decreased again in 2023 to $9,363 million, before recovering strongly to $19,213 million in 2024. The fluctuations may reflect changes in capital expenditures or working capital dynamics alongside operational performance.
Interest Paid, Net of Tax
Merck & Co. Inc., interest paid, net of tax calculation
US$ 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
= × =
The analysis of the financial data reveals notable fluctuations and trends in the effective income tax rate (EITR) and the interest paid, net of tax, for the periods under review.
- Effective Income Tax Rate (EITR)
- The effective income tax rate shows a general consistency in the initial years, with rates of 19.4% in 2020, dropping significantly to 11% in 2021, and maintaining a similar level at 11.7% in 2022. However, a substantial spike to 80% is observed in 2023, indicating a possible one-time tax event or regulatory impact, before reverting to 14.1% in 2024. This sharp increase and subsequent decrease suggest volatility in the tax expense or changes in tax-related circumstances during this period.
- Interest Paid, Net of Tax
- The net interest paid demonstrates an overall upward trajectory with some variability. Starting at $663 million in 2020, it increased slightly to $693 million in 2021, followed by a significant rise to $827 million in 2022. A marked decrease to $220 million occurs in 2023, which may indicate reduced borrowing costs or debt levels during that year. However, there is a sharp increase again to $1,117 million in 2024, reaching the highest level in the period reviewed. This volatility in interest expense could reflect changes in debt structure, interest rates, or financial strategy.
Enterprise Value to FCFF Ratio, Current
Merck & Co. Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| AbbVie Inc. | |
| Amgen Inc. | |
| Bristol-Myers Squibb Co. | |
| Danaher Corp. | |
| Eli Lilly & Co. | |
| Gilead Sciences Inc. | |
| Johnson & Johnson | |
| Pfizer Inc. | |
| Regeneron Pharmaceuticals Inc. | |
| Thermo Fisher Scientific Inc. | |
| Vertex Pharmaceuticals Inc. | |
| EV/FCFF, Sector | |
| Pharmaceuticals, Biotechnology & Life Sciences | |
| EV/FCFF, Industry | |
| Health Care | |
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
Merck & Co. Inc., 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| EV/FCFF, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| EV/FCFF, Industry | ||||||
| Health Care | ||||||
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 exhibited a rising trend from 2020 through 2023, increasing from approximately $212.6 billion to $354.3 billion. However, in 2024, there was a notable decline to about $254.4 billion, marking a significant reduction after several years of growth.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm showed volatility across the five-year period. It increased substantially from $6.2 billion in 2020 to a peak of $15.5 billion in 2022. This was followed by a sharp decrease to $9.4 billion in 2023, before rising again to its highest value in 2024 at $19.2 billion. This pattern indicates fluctuating operational cash generation capability with a strong recovery in the most recent year.
- EV/FCFF Ratio
- The EV/FCFF multiple showed a generally downward trajectory from 2020 to 2022, decreasing from 34.12 to 19.09, implying improved valuation relative to cash flow during this period. However, there was a sharp increase to 37.84 in 2023, indicating a potentially stretched valuation relative to cash flows for that year. In 2024, the ratio dropped significantly to 13.24, suggesting a much more conservative or attractive valuation based on free cash flow at the end of the period.
- Overall Insights
- The data reflects an enterprise value and free cash flow relationship that experienced fluctuations, likely influenced by changes in operational performance and market valuation perceptions. The peak EV in 2023 combined with a decline in free cash flow led to a high EV/FCFF ratio, signaling reduced fiscal efficiency or increased market optimism. The subsequent decrease in EV alongside a substantial rise in free cash flow in 2024 resulted in a much lower ratio, which might indicate improved operational performance or a consolidation of market value. These movements merit further investigation into underlying operational or market factors driving these trends.