Microsoft Excel LibreOffice Calc

Oracle Corp. (ORCL)


Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate


Free Cash Flow to The Firm (FCFF)

Oracle Corp., FCFF calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Net income 11,083  3,825  9,335  8,901  9,938  10,955 
Noncontrolling interests in income 152  135  118  116  113  98 
Net noncash charges 3,576  3,766  3,449  3,474  3,272  3,550 
Changes in operating assets and liabilities, net of effects from acquisitions (260) 7,660  1,224  1,070  1,013  318 
Net cash provided by operating activities 14,551  15,386  14,126  13,561  14,336  14,921 
Cash paid for interest, net of tax1 1,795  1,599  1,307  1,257  791  661 
Capital expenditures (1,660) (1,736) (2,021) (1,189) (1,391) (580)
Free cash flow to the firm (FCFF) 14,686  15,249  13,412  13,629  13,736  15,002 

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Oracle Corp.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Oracle Corp.’s FCFF increased from 2017 to 2018 but then slightly declined from 2018 to 2019.

Interest Paid, Net of Tax

Oracle Corp., interest paid, net of tax calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Effective Income Tax Rate (EITR)
EITR1 12.80% 16.30% 18.90% 22.20% 22.60% 20.10%
Interest Paid, Net of Tax
Cash paid for interest, before tax 2,059  1,910  1,612  1,616  1,022  827 
Less: Cash paid for interest, tax2 264  311  305  359  231  166 
Cash paid for interest, net of tax 1,795  1,599  1,307  1,257  791  661 

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

2 Cash paid for interest, tax = Cash paid for interest × EITR
= 2,059 × 12.80% = 264


Enterprise Value to FCFF Ratio, Current

Oracle Corp., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Selected Financial Data (USD $ in millions)
Enterprise value (EV) 210,861 
Free cash flow to the firm (FCFF) 14,686 
Ratio
EV/FCFF 14.36
Benchmarks
EV/FCFF, Competitors
Adobe Inc. 39.05
Alphabet Inc. 29.45
Facebook Inc. 34.19
International Business Machines Corp. 12.92
Intuit Inc. 35.50
Microsoft Corp. 29.67
salesforce.com inc. 41.41
EV/FCFF, Sector
Software & Computer Services 26.77
EV/FCFF, Industry
Technology 20.86

Based on: 10-K (filing date: 2019-06-21).

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.


Enterprise Value to FCFF Ratio, Historical

Oracle Corp., historical EV/FCFF calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
May 31, 2019 May 31, 2018 May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014
Selected Financial Data (USD $ in millions)
Enterprise value (EV)1 206,124  169,425  202,154  153,181  166,064  164,789 
Free cash flow to the firm (FCFF)2 14,686  15,249  13,412  13,629  13,736  15,002 
Ratio
EV/FCFF3 14.03 11.11 15.07 11.24 12.09 10.98
Benchmarks
EV/FCFF, Competitors
Adobe Inc. 31.36 33.45 25.29 30.64 28.06
Alphabet Inc. 29.97 27.15 18.05 24.85 26.71
Facebook Inc. 28.30 29.70 30.03 48.05 57.05
International Business Machines Corp. 12.27 12.20 14.18 11.32 14.03
Intuit Inc. 27.69 25.66 31.97 17.54 17.62
Microsoft Corp. 23.12 15.52 14.60 12.94 10.67
salesforce.com inc. 40.69 40.62 27.87 36.70 53.67 409.10
EV/FCFF, Sector
Software & Computer Services 23.10 20.94 17.56 18.55 17.03
EV/FCFF, Industry
Technology 19.09 18.99 15.02 13.83 14.40

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-22), 10-K (filing date: 2015-06-25), 10-K (filing date: 2014-06-26).

2019 Calculations

3 EV/FCFF = EV ÷ FCFF
= 206,124 ÷ 14,686 = 14.03

Ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Oracle Corp.’s EV/FCFF ratio declined from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.