Enterprise Value to FCFF (EV/FCFF)
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Reynolds American Inc. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
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Free Cash Flow to The Firm (FCFF)
Reynolds American Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The analysis of the financial data reveals fluctuations in the company's cash flow metrics over the five-year period from 2012 to 2016.
- Net cash flows from operating activities
- There is a noticeable decline from 2012 through 2015 with a steep drop in 2015, where cash flow falls to 196 million from 1,623 million in the previous year. However, in 2016, there is a significant recovery, increasing to 1,280 million, though not reaching the earlier peak levels observed in 2012 and 2014.
- Free cash flow to the firm (FCFF)
- The free cash flow data follows a similar trend to operating cash flows. It decreases from 1,642 million in 2012 to a low of 282 million in 2015. This represents a sharp reduction in liquidity generation during that year. The subsequent increase in 2016 to 1,520 million indicates a strong rebound, approaching values seen earlier in the period.
Overall, the firm's cash generation capabilities experienced volatility, with a pronounced dip in 2015 across both operating cash flows and free cash flow. The recovery observed in 2016 suggests potential operational improvements or changes in cash management strategies. Nevertheless, the data highlights the need to examine 2015's underlying causes to understand the sharp decline fully. The recent upward trend is a positive indicator but should be monitored for sustainability.
Interest Paid, Net of Tax
Reynolds American Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2 2016 Calculation
Interest paid, tax = Interest paid × EITR
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate showed some variability over the five-year period. Beginning at 34.9% in 2012, the rate increased to 37.3% in 2013, followed by a slight decrease to 36.1% in 2014. A notable spike occurred in 2015 when the rate reached 49%, representing a significant increase compared to previous years. In 2016, the rate adjusted downward to 37.3%, returning closer to earlier levels, but still above the initial 2012 rate.
- Interest Paid, Net of Tax
- Interest paid, net of tax, displayed a clear upward trend throughout the period in question. The amount started at US$162 million in 2012 and showed minor fluctuation with US$167 million in 2013 and US$161 million in 2014. However, from 2014 onwards, the figure rose sharply to US$260 million in 2015, and then almost doubled to US$446 million in 2016. This steady increase suggests a growing debt-related expense or increased borrowing costs during these years.
Enterprise Value to FCFF Ratio, Current
Reynolds American Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Coca-Cola Co. | |
| Mondelēz International Inc. | |
| PepsiCo Inc. | |
| Philip Morris International Inc. | |
Based on: 10-K (reporting date: 2016-12-31).
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
Reynolds American Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
3 2016 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- Over the five-year period, the enterprise value exhibited a consistent upward trend. Starting at US$26.89 billion in 2012, it increased moderately to US$29.42 billion in 2013. A significant rise occurred in 2014 with the enterprise value reaching US$41.47 billion, followed by a sharp increase in 2015 to US$83.96 billion. In 2016, the upward trend continued, albeit at a slower pace, culminating at approximately US$97.44 billion.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm showed more volatility. After an initial decrease from US$1.64 billion in 2012 to US$1.32 billion in 2013, FCFF rebounded to US$1.58 billion in 2014. However, there was a significant drop in 2015 to US$282 million, representing a sharp decline in cash generation capacity. By 2016, FCFF recovered to US$1.52 billion, nearly returning to earlier levels but still marked by the considerable dip in the interim year.
- EV to FCFF Ratio
- This ratio, which measures the valuation relative to cash flow, demonstrated pronounced fluctuations. It rose from 16.38 in 2012 to 22.24 in 2013, and further increased to 26.24 in 2014. In 2015, the ratio escalated dramatically to 297.61, reflecting the steep decline in FCFF despite a rising enterprise value. In 2016, it decreased to 64.09, indicating some normalization but still reflecting a relatively high valuation compared to cash flow levels.
- Summary Insights
- The data indicates strong growth in enterprise value over the period analyzed, suggesting increased market valuation and possibly business expansion or acquisition activity. Free cash flow experienced volatility, with a notable sharp drop in 2015 that substantially affected the EV/FCFF ratio. The elevated ratio in 2015 signals potential valuation concerns relative to cash generation capabilities during that year. The partial recovery in 2016 shows improvement in cash flow, but the ratio remains elevated compared to the early years, implying sustained market optimism or possible financial leverage considerations.