Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Northrop Grumman Corp., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
- Net Cash Provided by Operating Activities
- The net cash provided by operating activities exhibited an overall declining trend from 2018 through 2022. It increased from 3,827 million USD in 2018 to a peak of 4,305 million USD in 2020. However, post-2020, there was a notable decrease, declining to 3,567 million USD in 2021, and further to 2,901 million USD in 2022. This decrease in the last two years could suggest challenges in generating operating cash flow or changes in working capital management.
- Free Cash Flow to the Firm (FCFF)
- The FCFF reflected a similar pattern to operating cash flows, showing initial growth followed by a decline. It rose from 2,961 million USD in 2018 to 3,493 million USD in 2019, maintaining a comparable level at 3,374 million USD in 2020. Subsequently, FCFF dropped significantly to 2,599 million USD in 2021 and further declined to 1,864 million USD in 2022. This substantial decrease over the period may indicate increased capital expenditures or reduced operating cash flow, affecting the cash available to providers of capital.
- Summary of Trends
- Both operating cash flow and free cash flow peaked around 2019-2020 and have shown a downward trajectory since then. The decreasing free cash flow relative to operating cash flow in the latter years suggests increased capital investments or other cash outflows that have reduced overall liquidity available for debt and equity stakeholders. The overall decline in these cash flow measures could be a signal for stakeholders to investigate the drivers behind reduced cash generation and consider the implications for future financial flexibility and investment capacity.
Interest Paid, Net of Tax
Northrop Grumman Corp., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
2 2022 Calculation
Interest payments, net of interest received, tax = Interest payments, net of interest received × EITR
= 474 × 16.10% = 76
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited fluctuations over the five-year period. Starting at 15.9% in 2018, it decreased to 11.8% in 2019, indicating a reduction in tax burden that year. In 2020, the rate increased again to 14.5%, followed by a more substantial rise to 21.6% in 2021, reaching the highest point in the timeframe considered. By 2022, the rate declined to 16.1%, suggesting some alleviation of tax expenses compared to the previous year. Overall, the EITR varied significantly, with a notable peak in 2021.
- Interest Payments, Net of Interest Received, Net of Tax (in US$ millions)
- The net interest payments showed an overall increasing trend from 2018 through 2020. Beginning at $383 million in 2018, the amount rose to $460 million in 2019 and further to $489 million in 2020. However, in the two subsequent years, there was a decline, dropping to $447 million in 2021 and further down to $398 million in 2022. This pattern indicates rising net interest expenses initially, followed by a reduction that may reflect changes in debt structure, interest rates, or operational cash flows affecting interest costs.
Enterprise Value to FCFF Ratio, Current
Northrop Grumman Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 79,803) |
| Free cash flow to the firm (FCFF) | 1,864) |
| Valuation Ratio | |
| EV/FCFF | 42.82 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | — |
| Caterpillar Inc. | 20.04 |
| Eaton Corp. plc | 38.11 |
| GE Aerospace | 46.28 |
| Honeywell International Inc. | 31.01 |
| Lockheed Martin Corp. | 20.67 |
| RTX Corp. | 37.76 |
| EV/FCFF, Sector | |
| Capital Goods | 36.76 |
| EV/FCFF, Industry | |
| Industrials | 32.45 |
Based on: 10-K (reporting date: 2022-12-31).
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
Northrop Grumman Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 78,175) | 67,634) | 58,949) | 76,153) | 59,592) | |
| Free cash flow to the firm (FCFF)2 | 1,864) | 2,599) | 3,374) | 3,493) | 2,961) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 41.95 | 26.02 | 17.47 | 21.80 | 20.12 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Boeing Co. | 37.53 | — | — | — | — | |
| Caterpillar Inc. | 23.54 | 20.50 | 23.83 | — | — | |
| Eaton Corp. plc | 33.44 | 38.16 | 21.94 | — | — | |
| GE Aerospace | 17.29 | 56.53 | 32.34 | — | — | |
| Honeywell International Inc. | 29.82 | 25.22 | 26.49 | — | — | |
| Lockheed Martin Corp. | 19.69 | 13.92 | 14.64 | — | — | |
| RTX Corp. | 28.45 | 27.29 | 35.26 | — | — | |
| EV/FCFF, Sector | ||||||
| Capital Goods | 25.87 | 32.16 | 74.97 | — | — | |
| EV/FCFF, Industry | ||||||
| Industrials | 24.30 | 28.80 | 189.49 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 78,175 ÷ 1,864 = 41.95
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value exhibited variability over the analyzed period. Starting at $59,592 million in 2018, the value increased to $76,153 million in 2019, reflecting a significant rise. Subsequently, it decreased to $58,949 million in 2020, indicating a notable contraction. The figure rebounded to $67,634 million in 2021 and further increased to $78,175 million in 2022, marking the highest level in the five-year span.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm showed a declining trend overall. It rose from $2,961 million in 2018 to $3,493 million in 2019, reaching a peak early in the period. A slight decrease occurred in 2020 to $3,374 million, followed by a more pronounced decline to $2,599 million in 2021. This downward trajectory continued in 2022 with the cash flow diminishing to $1,864 million, the lowest point recorded in the given timeframe.
- EV/FCFF Ratio
- The EV to FCFF ratio demonstrated substantial fluctuations. Initially, the ratio increased modestly from 20.12 in 2018 to 21.8 in 2019, then declined to 17.47 in 2020. After 2020, the ratio escalated sharply, reaching 26.02 in 2021 and surging to 41.95 in 2022. The rising ratio in the last two years suggests increasing market valuation relative to cash flow generation, likely influenced by the simultaneous increase in enterprise value and the decrease in free cash flow.