Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
Reynolds American Inc., FCFE 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 financial performance between 2012 and 2016 is characterized by a notable disconnect between operational cash generation and the cash flow available to equity holders.
- Operating Cash Flow Dynamics
- Net cash flows from operating activities remained relatively stable for the majority of the period, fluctuating between US$ 1,308 million and US$ 1,623 million, with a significant and anomalous dip to US$ 196 million in 2015. The metric returned to a more baseline level of US$ 1,280 million in 2016.
- Free Cash Flow to Equity (FCFE) Analysis
- FCFE exhibited extreme variance, moving from US$ 2,901 million in 2012 to a peak of US$ 8,477 million in 2015, and subsequently falling to negative US$ 3,291 million in 2016. This volatility indicates that FCFE was heavily influenced by factors outside of core operational performance.
- Impact of Financing and Capital Expenditures
- The sharp divergence between operating cash flows and FCFE suggests a heavy reliance on financing activities to manage liquidity. The anomalous peak in 2015, where FCFE vastly exceeded operating cash flow, implies a substantial influx of cash through net borrowing. Conversely, the negative FCFE in 2016, occurring despite positive operating cash flows, points toward significant debt repayments or intensified capital expenditures during that fiscal year.
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Price to FCFE Ratio, Current
Reynolds American Inc., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 1,426,711,959 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | (3,291) |
| FCFE per share | -2.31 |
| Current share price (P) | 64.47 |
| Valuation Ratio | |
| P/FCFE | — |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| Coca-Cola Co. | 77.44 |
| Mondelēz International Inc. | 15.91 |
| PepsiCo Inc. | 16.24 |
| Philip Morris International Inc. | 26.62 |
Based on: 10-K (reporting date: 2016-12-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
Reynolds American Inc., historical P/FCFE calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 1,425,934,305 | 1,427,341,341 | 1,062,567,026 | 1,073,894,304 | 1,105,896,384 | |
| Selected Financial Data (US$) | ||||||
| Free cash flow to equity (FCFE) (in millions)2 | (3,291) | 8,477) | 1,340) | 1,044) | 2,901) | |
| FCFE per share3 | -2.31 | 5.94 | 1.26 | 0.97 | 2.62 | |
| Share price1, 4 | 60.54 | 48.50 | 35.15 | 24.04 | 21.97 | |
| Valuation Ratio | ||||||
| P/FCFE5 | — | 8.17 | 27.87 | 24.73 | 8.38 | |
| Benchmarks | ||||||
| P/FCFE, Competitors6 | ||||||
| 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).
1 Data adjusted for splits and stock dividends.
3 2016 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= -3,291,000,000 ÷ 1,425,934,305 = -2.31
4 Closing price as at the filing date of Reynolds American Inc. Annual Report.
5 2016 Calculation
P/FCFE = Share price ÷ FCFE per share
= 60.54 ÷ -2.31 = —
6 Click competitor name to see calculations.
The financial trajectory between 2012 and 2016 is characterized by a steady increase in share price contrasted with significant volatility in Free Cash Flow to Equity (FCFE) per share. This divergence resulted in substantial fluctuations in the P/FCFE ratio, indicating inconsistent valuation multiples over the period.
- Share Price Performance
- A consistent upward trend is observed in the share price, which rose from 21.97 US$ in 2012 to 60.54 US$ by the end of 2016. This represents a steady appreciation in market valuation despite the instability of underlying cash flows.
- FCFE per Share Volatility
- Cash flow to equity demonstrated extreme instability over the five-year period. After declining from 2.62 US$ in 2012 to 0.97 US$ in 2013, a substantial peak of 5.94 US$ was reached in 2015. This trend reversed abruptly in 2016, with FCFE per share falling to -2.31 US$, signaling a transition into negative free cash flow.
- P/FCFE Ratio Analysis
- The P/FCFE ratio experienced a sharp expansion between 2012 and 2014, increasing from 8.38 to a peak of 27.87. This expansion was primarily driven by the combination of a rising share price and depressed FCFE per share. The ratio contracted significantly to 8.17 in 2015, corresponding with the surge in FCFE. For the period ending December 31, 2016, the ratio could not be calculated as the negative FCFE per share rendered the metric inapplicable.
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