SLB N.V. (NYSE:SLB)

The financial data reveals notable trends in the company's cash generation and free cash flow over the five-year period under review. The net cash provided by operating activities exhibits an overall upward trajectory, increasing from 2,944 million US dollars at the end of 2020 to a peak of 6,637 million US dollars in 2023, before a slight decline to 6,602 million US dollars in 2024. This indicates a strong capacity to generate cash from core business operations, with a particularly significant surge observed between 2022 and 2023.

Free cash flow to the firm (FCFF) follows a similar pattern, rising from 1,980 million US dollars in 2020 to 3,451 million US dollars in 2021, then experiencing a decline to 1,879 million US dollars in 2022. Following this dip, FCFF recovered substantially, reaching 4,445 million US dollars in 2023 and slightly decreasing to 4,403 million US dollars in 2024. This trend suggests fluctuations in capital expenditures, working capital changes, or other investing activities that impacted free cash flow, despite the general increase in operating cash flow.

Net Cash Provided by Operating Activities

Steady increase from 2020 to 2024 with a peak in 2023.

A marked jump between 2022 and 2023 highlights improved operational efficiency or higher earnings quality during this period.

The minimal decrease in 2024 suggests stabilization at a higher cash generation level compared to earlier years.

Free Cash Flow to the Firm (FCFF)

Rises sharply from 2020 to 2021, indicating enhanced liquidity.

A pronounced decline in 2022 may reflect increased investing activities or higher capital expenditures.

Strong recovery in 2023 and stable level in 2024 point to effective management of investments and operational cash flows.

Overall, the trends suggest the company has strengthened its cash-generating capabilities with an important consolidation phase in the most recent years. The divergence between net operating cash flow and free cash flow particularly in 2022 signals a period of increased outflows likely related to investment or growth strategies, which appear to have been managed efficiently by 2023 and 2024 to restore robust free cash flow levels.

The analysis of the financial metrics over the given period reveals notable trends in both the effective income tax rate and the net cash paid for interest.

Effective Income Tax Rate (EITR)

The effective income tax rate increased substantially from 7% in 2020 to 19% in 2021, marking a significant adjustment. Following this increase, the rate stabilized, maintaining a consistent level around 18-19% through 2022 to 2024. This suggests a shift in the company's tax environment or strategy starting in 2021, with a sustained higher tax liability in subsequent years.

Cash Paid for Interest, Net of Tax

There was a general downward trend in the net cash paid for interest over the five-year span. In 2020, interest payments stood at US$556 million, decreasing steadily to US$454 million in 2021 and slightly increasing to US$461 million in 2022. From 2022 onward, payments further declined to US$407 million in 2023, followed by a marginal rise to US$413 million in 2024. This pattern reflects a reduction in interest burden overall, despite minor fluctuations, which may be indicative of refinancing at lower rates, reduced debt levels, or improved tax impacts on interest expenses.

In summary, the company experienced a marked increase in its effective income tax rate starting in 2021, which then stabilized at the higher level. Meanwhile, the cash outflow for interest showed a declining tendency, indicating potentially favorable financing conditions or debt management over the observed period.

The financial data reveals several notable trends concerning the company's valuation and cash flow performance over the five-year period.

Enterprise Value (EV)

The enterprise value showed a substantial increase from 44,665 million USD in 2020 to a peak of 89,522 million USD in 2022. This represents a doubling in value over two years. However, after 2022, there is a decline with EV dropping to 82,899 million USD in 2023 and further down to 66,942 million USD by 2024. This suggests a significant rise in market valuation in the early years followed by a retrenchment towards the latter part of the period.

Free Cash Flow to the Firm (FCFF)

FCFF experienced fluctuations throughout the period. It rose steadily from 1,980 million USD in 2020 to 3,451 million USD in 2021, indicating improved operational cash generation. However, it sharply declined to 1,879 million USD in 2022 before recovering strongly to 4,445 million USD in 2023 and maintaining a similar level of 4,403 million USD in 2024. This pattern indicates volatility in cash flows with a notable rebound in the last two years.

EV/FCFF Ratio

The EV to FCFF ratio declined from 22.56 in 2020 to 19.47 in 2021, suggesting an improved valuation relative to cash flow at that time. It then spiked dramatically to 47.65 in 2022, reflecting the sharp decrease in FCFF not matched by the EV increase, indicating potential overvaluation or cash flow stress. Subsequently, the ratio decreased significantly to 18.65 in 2023 and further to 15.2 in 2024, aligning with the EV decline and FCFF recovery, suggesting a more attractive valuation relative to cash flow towards the end of the period.

Overall, the data reflects an environment of considerable variability in both cash flow generation and market valuation. The initial rising trend in enterprise value accompanied by increasing cash flows reversed temporarily in 2022, marked by weaker cash flows and a sharp rise in the EV/FCFF ratio. The subsequent strong recovery in cash flow and reduction in enterprise value led to a more balanced ratio, indicating potential improvements in fundamental performance and valuation alignment in the final two years.