Enterprise Value to FCFF (EV/FCFF)
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- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Net Profit Margin since 2014
- Operating Profit Margin since 2014
- Return on Assets (ROA) since 2014
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Free Cash Flow to The Firm (FCFF)
Paycom Software Inc., FCFF calculation
US$ in thousands
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).
1, 2 See details »
The financial data indicates a consistent upward trend in both operating cash flow and free cash flow over the observed five-year period, reflecting increasing cash generation and liquidity strength.
- Net Cash Provided by Operating Activities
- There is a steady growth from $184,817 thousand in 2018 to $365,103 thousand in 2022. This represents an almost doubling of operating cash flow over the period, with notable acceleration between 2020 and 2021 where the increase exceeded $90,000 thousand. The continuous rise suggests improving operational efficiency and stronger cash conversion from core business activities.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow also shows a positive upward trajectory, rising from $126,087 thousand in 2018 to $229,318 thousand in 2022. The growth is more moderate compared to operating cash flow but maintains a consistent increase annually. The largest jump occurs between 2020 and 2021, similar to operating cash flow, indicating enhanced capacity to generate cash after accounting for capital expenditures.
Overall, the company demonstrates robust cash flow performance with an expanding base of available cash from operations and free cash flow, supporting potential for reinvestment, debt reduction, or shareholder returns. The parallel growth in these metrics highlights an improving financial position and operational scalability over the analyzed years.
Interest Paid, Net of Tax
Paycom Software Inc., interest paid, net of tax calculation
US$ in thousands
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
Cash paid for interest, net of amounts capitalized, tax = Cash paid for interest, net of amounts capitalized × EITR
= × =
3 2022 Calculation
Interest costs capitalized, tax = Interest costs capitalized × EITR
= × =
- Effective Income Tax Rate (EITR)
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The effective income tax rate showed fluctuation over the five-year period. It started at 22% in 2018, decreased to 20% in 2019, then rose to 23% in both 2020 and 2021. In 2022, the rate increased further to 28%, representing the highest point in the period analyzed. This upward trend in the last two years suggests a rising tax burden or changes in tax regulation or company operations affecting the tax expense.
- Cash Paid for Interest, Net of Amounts Capitalized, Net of Tax
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Cash paid for interest generally increased between 2018 and 2019, moving from $552 thousand to $713 thousand. Data for 2020 is missing, which limits analysis for that year. However, by 2021, the figure rose sharply to $2,365 thousand, indicating a significant increase in interest payments. The absence of data for 2022 restricts further analysis, but the trend up to 2021 suggests increased borrowing costs or higher levels of debt service.
- Interest Costs Capitalized, Net of Tax
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Interest costs capitalized showed a declining trend overall. Starting at $624 thousand in 2018, the amount decreased to $480 thousand in 2019, then increased to $1,155 thousand in 2020, representing a temporary peak. Subsequently, the costs declined again to $1,078 thousand in 2021 and further to $648 thousand in 2022. The fluctuations indicate variable capitalization practices or changes in ongoing projects financed through interest-bearing funds.
Enterprise Value to FCFF Ratio, Current
Paycom Software Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Industry | |
| Industrials | |
Based on: 10-K (reporting date: 2022-12-31).
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
Paycom Software Inc., historical EV/FCFF calculation, comparison to benchmarks
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).
- Enterprise Value (EV)
- Over the five-year period, enterprise value exhibited significant volatility. It increased markedly from approximately $10.2 billion at the end of 2018 to a peak of $23.1 billion by the end of 2020. However, in the subsequent years, the enterprise value declined, dropping to $18.8 billion in 2021 and further to around $17.4 billion by the end of 2022. This pattern indicates rapid growth followed by a notable contraction in the firm's market valuation.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm demonstrated a steady upward trajectory across the same period. Starting at approximately $126 million in 2018, the FCFF showed gradual increases each year, reaching $134 million in 2020, then accelerating to $194 million by 2021, and further increasing to $229 million at the end of 2022. This consistent growth suggests an improving internal cash generation capability.
- EV to FCFF Ratio
- The EV/FCFF ratio provides insight into how the market values the firm's cash flow generation. This ratio surged sharply from around 81 in 2018 to a high of nearly 172 in 2020, reflecting a period where enterprise value outpaced free cash flow growth substantially. Subsequently, the ratio declined significantly to 96.6 in 2021 and further to approximately 76 in 2022. The decline in this ratio in the latter years suggests a realignment, either due to a decreasing valuation or improving cash flow performance, or a combination of both, resulting in a more moderate market valuation relative to free cash flow.
- Overall Interpretation
- The data reveals a dynamic scenario where the company experienced rapid expansion in enterprise value initially, followed by a phase of correction or stabilization. Concurrently, the consistent improvement in free cash flow indicates strengthening operational efficiency or profitability. The decreasing EV/FCFF ratio in the last two years points towards an increased emphasis on cash flow fundamentals by the market or a normalization of valuation metrics after peak levels. The interplay of these metrics suggests a maturing phase following a period of high growth and market optimism.