Enterprise Value to FCFF (EV/FCFF)
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Procter & Gamble Co. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Debt to Equity since 2005
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Free Cash Flow to The Firm (FCFF)
Procter & Gamble Co., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Operating Activities
- The cash flow from operating activities shows a general upward trend over the six-year period. Starting at US$15,242 million in 2019, it increased to US$17,403 million in 2020 and further to US$18,371 million in 2021. However, there was a decline in 2022 to US$16,723 million and a slight increase to US$16,848 million in 2023. A significant rebound occurred in 2024, with operating cash flow reaching US$19,846 million, the highest in the period analyzed.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm followed a similar pattern to operating activities, exhibiting overall growth over the analyzed years. It rose from US$12,220 million in 2019 to US$14,689 million in 2020 and continued increasing to US$16,017 million in 2021. There was a decline observed in 2022, dropping to US$13,938 million, with a modest recovery in 2023 to US$14,365 million. By 2024, FCFF increased markedly to US$17,225 million, indicating improved free cash generation capacity.
- General Insights
- Both operating activities cash flow and FCFF demonstrate resilient financial performance with a tendency for growth across the period, despite a dip in 2022. The decline in 2022 could be attributed to external factors impacting liquidity or operational efficiency during that particular year. The recovery and substantial increase in 2024 suggest strengthened operational effectiveness and enhanced cash generation capabilities, which positively affect the firm's financial flexibility and potential for investment or debt repayment.
Interest Paid, Net of Tax
Procter & Gamble Co., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
2 2024 Calculation
Cash payments for interest, tax = Cash payments for interest × EITR
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibited a notable decline from 34.7% in mid-2019 to significantly lower levels in the subsequent years, reaching approximately 17.2% in mid-2020. Between 2020 and 2022, the rate remained relatively stable, fluctuating between 17.2% and 18.5%. From 2022 onward, a gradual upward trend is observed, increasing from 17.8% to 20.2% by mid-2024. Overall, the tax rate decreased sharply initially, then stabilized at a lower level before experiencing moderate increases in recent years.
- Cash Payments for Interest, Net of Tax (US$ in millions)
- Cash payments for interest showed a steady upward trajectory over the period under review. Starting at $325 million in mid-2019, interest payments rose to $359 million in 2020 and continued to increase to $433 million by 2021. A slight decline occurred in 2022 to $371 million; however, payments surged markedly afterward, reaching $579 million in 2023 and further increasing to $701 million in 2024. This pattern suggests rising interest expenses, with a notable acceleration in the last two years.
Enterprise Value to FCFF Ratio, Current
Procter & Gamble Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Industry | |
| Consumer Staples | |
Based on: 10-K (reporting date: 2024-06-30).
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
Procter & Gamble Co., historical EV/FCFF calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
The analysis of the financial data over the period ending June 30, 2019 through June 30, 2024 reveals important trends related to the company's enterprise value, free cash flow to the firm, and the valuation multiple represented by the EV/FCFF ratio.
- Enterprise Value (EV)
- The enterprise value has demonstrated a consistent upward trajectory across the six years observed. Starting at US$307,076 million in 2019, it increased each year to reach US$419,670 million by 2024. This steady growth indicates an increasing market valuation of the company, reflecting investor confidence and possibly growth in the company's operations or strategic value.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm showed a general rising trend from US$12,220 million in 2019 to US$17,225 million in 2024, with a slight dip in 2022 to US$13,938 million from US$16,017 million in 2021 before recovering. This fluctuation suggests a temporary decline in operating cash generation or increased capital expenditures during 2022, followed by an improvement in 2023 and 2024. Overall, the ability to generate free cash flow has strengthened over the long term.
- EV/FCFF Ratio
- The EV to FCFF ratio declined from 25.13 in 2019 to a low of 22.86 in 2021, indicating that enterprise value growth was slightly outpaced by the increase in free cash flow, potentially signifying a more attractive valuation at that time. However, the ratio increased again in 2022 and 2023 to 26.63 and 27.39, respectively, before decreasing to 24.36 in 2024. This variation implies shifts in the market's valuation multiples, possibly influenced by changing perceptions of growth prospects or risk. The relatively higher ratio in 2022 and 2023 suggests the market may have been valuing the company's cash flows more aggressively during those years, while the decline in 2024 indicates a moderation in valuation multiples.
In summary, the company experienced consistent growth in enterprise value and free cash flow over the five-year span, despite some short-term variability in cash flow performance. The changes in the EV/FCFF ratio reveal fluctuating market valuations relative to the company's cash flow generation capacity, reflective of evolving investor sentiment and economic conditions.