Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Merck & Co. Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The financial information reveals fluctuations in both net cash provided by operating activities and free cash flow to the firm (FCFF) over the five-year period. A general pattern of increase followed by decrease is observed in both metrics.
- Net Cash from Operations
- Net cash provided by operating activities increased significantly from $13,122 million in 2021 to $19,095 million in 2022. This represents a substantial improvement in the company’s ability to generate cash from its core business. However, this was followed by a decrease to $13,006 million in 2023, before rebounding to $21,468 million in 2024. A subsequent decline to $16,472 million is noted in 2025.
- Free Cash Flow to the Firm (FCFF)
- FCFF mirrored the trend observed in net cash from operations. It rose from $9,367 million in 2021 to $15,534 million in 2022, indicating increased cash available to all investors (debt and equity holders) after covering operating expenses and necessary investments. A decrease to $9,363 million occurred in 2023, followed by a rise to $19,213 million in 2024. Finally, FCFF decreased to $13,487 million in 2025.
The correlation between net cash from operating activities and FCFF is strong, suggesting that changes in operating cash flow are a primary driver of changes in FCFF. The peaks in both metrics occur in 2022 and 2024, while troughs are observed in 2021 and 2023. The decrease in both metrics in 2025 warrants further investigation to determine the underlying causes, such as changes in working capital, capital expenditures, or operational efficiency.
- Overall Trend
- While both metrics demonstrate periods of growth, the volatility observed suggests potential cyclicality or sensitivity to external factors. The company experienced substantial growth in 2022 and 2024, but the declines in 2023 and 2025 indicate that these gains were not sustained. Continued monitoring of these trends is recommended.
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Interest Paid, Net of Tax
Merck & Co. Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
2 2025 Calculation
Interest paid, tax = Interest paid × EITR
= 1,300 × 13.30% = 173
The relationship between the effective income tax rate and interest paid, net of tax, exhibits notable fluctuations over the observed period. Interest expense, net of tax, increased significantly from 2021 to 2022, then decreased substantially in 2023, followed by increases in both 2024 and 2025. The effective income tax rate demonstrates considerable volatility, particularly with a large increase in 2023, before returning to a range similar to the earlier years.
- Interest Paid, Net of Tax
- Interest paid, net of tax, rose from US$693 million in 2021 to US$827 million in 2022, representing a 19.1% increase. A significant decline occurred in 2023, with interest paid, net of tax, falling to US$220 million. This represents a 73.5% decrease from the prior year. Subsequently, interest paid, net of tax, increased to US$1,117 million in 2024 and further to US$1,127 million in 2025. The 2024 and 2025 values represent substantial increases relative to 2023, indicating a potential shift in financing strategies or interest rate environment.
- Effective Income Tax Rate
- The effective income tax rate was 11.00% in 2021 and increased to 11.70% in 2022. A dramatic increase was observed in 2023, reaching 80.00%. This substantial rise suggests a significant change in taxable income or the recognition of tax benefits. The rate then decreased to 14.10% in 2024 and 13.30% in 2025, though remaining elevated compared to the 2021 and 2022 levels. These fluctuations could be attributable to changes in tax legislation, jurisdictional mix of earnings, or the utilization of tax loss carryforwards.
The inverse relationship between the substantial decrease in interest paid, net of tax, in 2023 and the corresponding spike in the effective income tax rate warrants further investigation. It is possible that a significant tax benefit was realized in 2023, offsetting a portion of the interest expense. The subsequent increases in interest paid, net of tax, in 2024 and 2025, coupled with a decreasing effective income tax rate, suggest a return to more typical tax obligations and potentially increased borrowing or higher interest rates.
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Enterprise Value to FCFF Ratio, Current
Merck & Co. Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 322,542) |
| Free cash flow to the firm (FCFF) | 13,487) |
| Valuation Ratio | |
| EV/FCFF | 23.91 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| AbbVie Inc. | 21.53 |
| Amgen Inc. | 22.03 |
| Bristol-Myers Squibb Co. | 10.49 |
| Danaher Corp. | 26.59 |
| Eli Lilly & Co. | 93.58 |
| Gilead Sciences Inc. | 18.22 |
| Johnson & Johnson | 27.89 |
| Pfizer Inc. | 18.01 |
| Regeneron Pharmaceuticals Inc. | 19.08 |
| Thermo Fisher Scientific Inc. | 27.01 |
| Vertex Pharmaceuticals Inc. | 33.54 |
| EV/FCFF, Sector | |
| Pharmaceuticals, Biotechnology & Life Sciences | 26.90 |
| EV/FCFF, Industry | |
| Health Care | 25.54 |
Based on: 10-K (reporting date: 2025-12-31).
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, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 341,234) | 254,436) | 354,322) | 296,532) | 217,996) | |
| Free cash flow to the firm (FCFF)2 | 13,487) | 19,213) | 9,363) | 15,534) | 9,367) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 25.30 | 13.24 | 37.84 | 19.09 | 23.27 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| AbbVie Inc. | 23.29 | 20.05 | 14.89 | 12.15 | 13.18 | |
| Amgen Inc. | 23.08 | 15.35 | 22.22 | 16.01 | 15.82 | |
| Bristol-Myers Squibb Co. | 10.84 | 9.94 | 9.14 | 13.87 | 10.52 | |
| Danaher Corp. | 29.01 | 28.93 | 36.34 | 25.74 | 28.25 | |
| Eli Lilly & Co. | 107.04 | 200.96 | 655.43 | 59.17 | 38.39 | |
| Gilead Sciences Inc. | 19.36 | 14.50 | 13.41 | 13.58 | 8.42 | |
| Johnson & Johnson | 28.52 | 18.16 | 19.30 | 23.80 | 21.25 | |
| Pfizer Inc. | 18.08 | 15.33 | 32.24 | 9.15 | 8.40 | |
| Regeneron Pharmaceuticals Inc. | 20.01 | 19.97 | 25.33 | 23.31 | 9.81 | |
| Thermo Fisher Scientific Inc. | 28.42 | 26.13 | 28.85 | 31.61 | 33.14 | |
| Vertex Pharmaceuticals Inc. | 36.94 | — | 29.45 | 16.68 | 22.47 | |
| EV/FCFF, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | 28.89 | 23.59 | 27.29 | 18.08 | 16.12 | |
| EV/FCFF, Industry | ||||||
| Health Care | 27.34 | 24.05 | 25.98 | 18.66 | 17.80 | |
Based on: 10-K (reporting date: 2025-12-31), 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).
3 2025 Calculation
EV/FCFF = EV ÷ FCFF
= 341,234 ÷ 13,487 = 25.30
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibits considerable fluctuation over the observed period. Initial values indicate a decreasing trend, followed by a substantial increase, and then another decline, concluding with a moderate rise. A detailed examination of the components and the resulting ratio reveals specific patterns.
- Enterprise Value (EV)
- Enterprise Value increased from US$217,996 million in 2021 to US$296,532 million in 2022, representing a significant expansion. This growth continued into 2023, reaching US$354,322 million. However, a notable decrease occurred in 2024, with EV falling to US$254,436 million. A subsequent recovery is observed in 2025, with EV rising to US$341,234 million.
- Free Cash Flow to the Firm (FCFF)
- Free Cash Flow to the Firm demonstrated an increase from US$9,367 million in 2021 to US$15,534 million in 2022. FCFF then decreased in 2023 to US$9,363 million, mirroring a similar pattern to the EV decline in 2024, where FCFF increased substantially to US$19,213 million. Finally, FCFF decreased to US$13,487 million in 2025.
- EV/FCFF Ratio
- The EV/FCFF ratio began at 23.27 in 2021 and decreased to 19.09 in 2022, coinciding with the increases in both EV and FCFF. A substantial increase to 37.84 occurred in 2023, driven by a larger decrease in FCFF relative to EV. The ratio then experienced a significant decline in 2024, falling to 13.24, attributable to the substantial increase in FCFF. The ratio increased again in 2025, reaching 25.30, reflecting a moderate increase in EV and a decrease in FCFF.
The volatility in the EV/FCFF ratio suggests a dynamic relationship between the company’s enterprise value and its cash flow generation. The fluctuations indicate potential shifts in market expectations, operational performance, or investment strategies. The ratio’s movement is heavily influenced by changes in both EV and FCFF, and a comprehensive understanding requires further investigation into the underlying drivers of these changes.
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