Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Norfolk Southern Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
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The financial performance from 2017 through 2021 is characterized by a sustained increase in the firm's ability to generate cash available to all capital providers. A consistent upward trajectory is observed in the Free Cash Flow to the Firm (FCFF), which increased annually throughout the reporting period.
- Net Cash Provided by Operating Activities
- Operating cash flows exhibited a general growth pattern, rising from 3,253 million USD in 2017 to 4,255 million USD in 2021. A temporary contraction occurred in 2020, when figures declined to 3,637 million USD, followed by a significant recovery in the subsequent year.
- Free Cash Flow to the Firm (FCFF) Growth
- FCFF demonstrated uninterrupted year-over-year growth, ascending from 2,089 million USD in 2017 to 3,401 million USD in 2021. This represents a steady expansion of the net cash position available after accounting for the necessary capital investments required to maintain or expand the business.
- Cash Flow Divergence and Capital Allocation
- A notable divergence is observed in 2020, where FCFF continued to rise despite a decline in net cash provided by operating activities. This indicates a strategic reduction in capital expenditures during that fiscal year, which buffered the impact of lower operating cash and supported the continued growth of cash available to investors.
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Interest Paid, Net of Tax
Norfolk Southern Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2 2021 Calculation
Cash paid during the year for interest, net of amounts capitalized, tax = Cash paid during the year for interest, net of amounts capitalized × EITR
= 579 × 22.50% = 130
3 2021 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 11 × 22.50% = 2
The financial trajectory between 2017 and 2021 indicates a general increase in net cash outflows for interest, coupled with a significant reduction in the effective income tax rate and a steady decline in capitalized interest expenses.
- Cash Outflows for Interest
- A consistent upward trend in cash paid for interest, net of tax and capitalization, is observed from 2017 to 2020. Expenditures rose from 344 million US dollars in 2017 to a peak of 459 million US dollars in 2020, representing a cumulative increase of approximately 33.4%. A slight reversal occurred in 2021, with payments decreasing to 449 million US dollars.
- Interest Capitalization Patterns
- Interest capitalized, net of tax, remained relatively low and exhibited a gradual downward trajectory throughout the period. Starting at 13 million US dollars in 2017 and 2018, the amount decreased incrementally to 9 million US dollars by 2021. This trend suggests a reduction in the volume of interest-bearing costs attributed to long-term asset construction or infrastructure projects.
- Effective Income Tax Rate (EITR) Volatility
- A substantial contraction in the effective income tax rate occurred between 2017 and 2018, dropping from 34.9% to 23.1%. Following this initial decline, the rate remained relatively stable, fluctuating within a narrow corridor between 20.4% and 22.5% through 2021. This lower tax environment impacts the net-of-tax calculation for interest expenses, as a lower EITR reduces the value of the tax shield provided by interest payments.
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Enterprise Value to FCFF Ratio, Current
Norfolk Southern Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 75,570) |
| Free cash flow to the firm (FCFF) | 3,401) |
| Valuation Ratio | |
| EV/FCFF | 22.22 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| FedEx Corp. | 14.63 |
| Uber Technologies Inc. | 14.35 |
| Union Pacific Corp. | 31.09 |
| United Airlines Holdings Inc. | 12.74 |
| United Parcel Service Inc. | 19.63 |
| EV/FCFF, Sector | |
| Transportation | 25.50 |
| EV/FCFF, Industry | |
| Industrials | 39.87 |
Based on: 10-K (reporting date: 2021-12-31).
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
Norfolk Southern Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 77,842) | 73,428) | 66,454) | 56,645) | 48,511) | |
| Free cash flow to the firm (FCFF)2 | 3,401) | 2,946) | 2,695) | 2,373) | 2,089) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 22.89 | 24.92 | 24.65 | 23.87 | 23.22 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| FedEx Corp. | 18.72 | — | — | — | — | |
| Uber Technologies Inc. | — | — | — | — | — | |
| Union Pacific Corp. | 26.41 | — | — | — | — | |
| United Airlines Holdings Inc. | 79.24 | — | — | — | — | |
| United Parcel Service Inc. | 16.98 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Transportation | 24.82 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Industrials | 28.81 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
3 2021 Calculation
EV/FCFF = EV ÷ FCFF
= 77,842 ÷ 3,401 = 22.89
4 Click competitor name to see calculations.
Between 2017 and 2021, a consistent upward trajectory is observed in both the enterprise value and the free cash flow to the firm. The valuation multiple remained relatively stable over the five-year period, indicating a proportional relationship between the expansion of the firm's total value and its capacity to generate cash flow.
- Enterprise Value Trends
- The enterprise value increased steadily every year, rising from US$ 48,511 million in 2017 to US$ 77,842 million in 2021. This represents a substantial overall growth in the total market value of the entity's operations over the analyzed period.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated uninterrupted growth, climbing from US$ 2,089 million in 2017 to US$ 3,401 million in 2021. The continuous rise in FCFF suggests a strengthening ability to produce cash available for distribution to both debt and equity holders.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio remained within a narrow range, starting at 23.22 in 2017 and peaking at 24.92 in 2020. In 2021, the ratio decreased to 22.89, the lowest point in the five-year sequence. This decline indicates that the growth rate of free cash flow surpassed the growth rate of the enterprise value in the final year, resulting in a compression of the valuation multiple.
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