Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
National Oilwell Varco Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The financial performance from 2011 to 2015 is characterized by substantial volatility in cash generation. Both net cash provided by operating activities and free cash flow to the firm (FCFF) exhibited a cyclical pattern, reaching a peak in 2013 followed by a consistent decline through 2015.
- Operating Cash Flow Volatility
- Net cash provided by operating activities experienced a sharp contraction in 2012, falling from 2,143 million US$ to 620 million US$. This was followed by a rapid recovery in 2013, reaching a period high of 3,397 million US$. However, a downward trend ensued over the subsequent two years, with cash flow decreasing to 2,525 million US$ in 2014 and further to 1,332 million US$ by the end of 2015.
- Free Cash Flow to the Firm Trends
- FCFF mirrored the volatility of operating cash flows but with more pronounced fluctuations. A critical low occurred in 2012, where FCFF plummeted to 65 million US$. Similar to operating activities, FCFF peaked in 2013 at 2,805 million US$ before trending downward to 1,898 million US$ in 2014 and 1,013 million US$ in 2015.
- Analysis of Capital Intensity
- The consistent gap between net cash provided by operating activities and FCFF indicates ongoing capital expenditures throughout the five-year period. The pressure on cash conversion was most evident in 2012, where FCFF was nearly exhausted despite operating cash flow of 620 million US$. While the recovery in 2013 provided significant liquidity, the subsequent decline in both metrics through 2015 suggests a contraction in the firm's ability to generate surplus cash after accounting for necessary investments.
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Interest Paid, Net of Tax
National Oilwell Varco Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
EITR = 100 × Income tax expense ÷ EBT
= 100 × 178 ÷ -589 = -30.22%
2 2015 Calculation
Cash payments during the period for interest, tax = Cash payments during the period for interest × EITR
= 103 × -30.22% = -31
The cash payments for interest, net of tax, exhibited a significant upward trajectory between 2011 and 2015, increasing from 30 million USD to 134 million USD. This growth was not linear, characterized by a period of stability followed by two substantial surges in 2013 and 2015.
- Interest Payment Volatility
- Cash outflows remained relatively constant between 2011 and 2012. A sharp increase occurred in 2013, where payments rose to 77 million USD. Following a slight contraction to 72 million USD in 2014, the outflows accelerated sharply in 2015, reaching a peak of 134 million USD, which represents a 346% increase over the 2011 baseline.
- Effective Income Tax Rate (EITR) Trends
- The EITR demonstrated stability for the first four years of the period, fluctuating within a narrow band between 29.16% and 32.07%. A drastic shift occurred in 2015, when the rate moved into negative territory, reaching -30.22%.
- Correlation Between Tax Rates and Net Interest Costs
- The spike in net interest payments in 2015 coincides with the shift to a negative EITR. Because interest is reported net of tax, the transition from a positive tax rate (which provides a tax shield) to a negative tax rate increases the net cash burden of interest payments, contributing to the observed peak in outflows.
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Enterprise Value to FCFF Ratio, Current
National Oilwell Varco Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 14,260) |
| Free cash flow to the firm (FCFF) | 1,013) |
| Valuation Ratio | |
| EV/FCFF | 14.08 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| SLB N.V. | 17.93 |
Based on: 10-K (reporting date: 2015-12-31).
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
National Oilwell Varco Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 12,938) | 22,310) | 32,562) | 29,001) | 33,665) | |
| Free cash flow to the firm (FCFF)2 | 1,013) | 1,898) | 2,805) | 65) | 1,690) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 12.77 | 11.76 | 11.61 | 443.87 | 19.92 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
3 2015 Calculation
EV/FCFF = EV ÷ FCFF
= 12,938 ÷ 1,013 = 12.77
4 Click competitor name to see calculations.
The financial performance between 2011 and 2015 is characterized by a significant contraction in Enterprise Value (EV) and substantial volatility in Free Cash Flow to the Firm (FCFF). While the Enterprise Value remained relatively resilient through 2013, it entered a steep decline thereafter, falling from a peak of 32,562 million USD in 2013 to 12,938 million USD by the end of 2015.
- Enterprise Value Trends
- A marked downward trajectory is observed starting in 2014. The valuation decreased by approximately 31% between 2013 and 2014, followed by another sharp decline of approximately 42% in 2015, indicating a significant reduction in the overall market valuation of the firm's operations.
- Free Cash Flow to the Firm (FCFF) Volatility
- FCFF exhibited extreme instability during the analyzed period. A critical trough occurred in 2012, where cash flow dropped to 65 million USD, followed by a rapid recovery to a period high of 2,805 million USD in 2013. Subsequent years showed a steady erosion of cash flow, declining to 1,013 million USD by 2015.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio experienced a severe outlier in 2012, reaching 443.87 as a direct result of the diminished FCFF. Following this anomaly, the ratio stabilized significantly. Between 2013 and 2015, the ratio remained consistent, fluctuating within a narrow band between 11.61 and 12.77, suggesting that the decline in Enterprise Value was largely proportional to the decline in cash flow generation during those years.
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