Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Stryker Corp., FCFF calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
An analysis of the five-year period from 2017 to 2021 reveals a significant overall upward trajectory in both net cash provided by operating activities and Free Cash Flow to the Firm (FCFF). While growth was interrupted by a contraction in 2019, a robust recovery in 2020 led to a plateau of high cash generation in 2021.
- Net Cash Provided by Operating Activities
- Operating cash flows increased from US$ 1,559 million in 2017 to a peak of US$ 3,277 million in 2020. A notable decline occurred in 2019, where cash flow dropped to US$ 2,191 million, a decrease of approximately 16% from the 2018 level of US$ 2,610 million. This was followed by a substantial recovery in 2020, with an increase of nearly 49%, before stabilizing at US$ 3,263 million in 2021.
- Free Cash Flow to the Firm (FCFF)
- FCFF closely mirrored the trends observed in operating cash flows, rising from US$ 1,198 million in 2017 to US$ 3,022 million in 2021. The most aggressive growth phase occurred between 2017 and 2018, during which FCFF increased by 86%. Similar to the operating cash flow trend, FCFF experienced a decline to US$ 1,775 million in 2019 before rebounding to US$ 3,039 million in 2020.
- Cash Flow Conversion Efficiency
- The efficiency of converting operating cash flow into FCFF improved over the analyzed period. In 2017, FCFF represented approximately 76.8% of net cash provided by operating activities. By 2020 and 2021, this conversion rate climbed to approximately 92.7% and 92.6%, respectively. This trend indicates a reduction in the relative impact of capital expenditures on operating cash flow, allowing a larger proportion of generated cash to be available to the firm.
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Interest Paid, Net of Tax
Stryker Corp., interest paid, net of tax calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
2 2021 Calculation
Cash paid for interest on debt, tax = Cash paid for interest on debt × EITR
= 325 × 12.60% = 41
The analysis of cash paid for interest on debt, net of tax, reveals a general upward trend over the five-year period from 2017 to 2021, despite a temporary decline in 2018. The net interest outflow grew from 237 million USD in 2017 to a peak of 284 million USD in 2021.
- Net Interest Cash Outflow Patterns
- Following a reduction to 196 million USD in 2018, the cash paid for interest, net of tax, exhibited consistent annual growth. The values rose to 233 million USD in 2019, 249 million USD in 2020, and reached 284 million USD in 2021, representing a total increase of approximately 44% from the 2018 low.
- Effective Income Tax Rate Correlation
- The effective income tax rate (EITR) exhibited significant volatility, which directly impacts the net cost of interest payments. In 2018, the EITR reached its peak of 21.00%, which coincided with the lowest net interest outflow of 196 million USD, suggesting a heightened tax shield effect. Conversely, by 2021, the EITR declined to 12.60%, while net interest payments rose to their highest level of 284 million USD, indicating that a lower tax rate reduced the net tax benefit of interest deductions.
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Enterprise Value to FCFF Ratio, Current
Stryker Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 100,693) |
| Free cash flow to the firm (FCFF) | 3,022) |
| Valuation Ratio | |
| EV/FCFF | 33.32 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 23.81 |
| Elevance Health Inc. | 20.45 |
| Intuitive Surgical Inc. | 60.52 |
| Medtronic PLC | 23.29 |
| UnitedHealth Group Inc. | 21.69 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 20.96 |
| EV/FCFF, Industry | |
| Health Care | 26.35 |
Based on: 10-K (reporting date: 2021-12-31).
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
Stryker Corp., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 104,469) | 103,264) | 88,412) | 73,519) | 59,894) | |
| Free cash flow to the firm (FCFF)2 | 3,022) | 3,039) | 1,775) | 2,234) | 1,198) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 34.57 | 33.98 | 49.82 | 32.91 | 50.00 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | 23.47 | — | — | — | — | |
| Elevance Health Inc. | 12.74 | — | — | — | — | |
| Intuitive Surgical Inc. | 56.01 | — | — | — | — | |
| Medtronic PLC | 33.84 | — | — | — | — | |
| UnitedHealth Group Inc. | 22.21 | — | — | — | — | |
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | 23.51 | — | — | — | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 17.80 | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
3 2021 Calculation
EV/FCFF = EV ÷ FCFF
= 104,469 ÷ 3,022 = 34.57
4 Click competitor name to see calculations.
The financial trajectory from 2017 to 2021 is characterized by a substantial and consistent expansion in enterprise value, contrasted by fluctuating free cash flow to the firm (FCFF), resulting in a volatile EV/FCFF valuation ratio.
- Enterprise Value Expansion
- A strong upward trend is observed in enterprise value, which grew from 59,894 million USD in 2017 to 104,469 million USD by 2021. The most rapid growth occurred between 2017 and 2020, with the value increasing by approximately 72% over this four-year period before stabilizing in 2021.
- Free Cash Flow to the Firm Dynamics
- FCFF exhibited significant variability throughout the period. Although the value increased from 1,198 million USD in 2017 to 3,022 million USD in 2021, the progression was non-linear. A notable contraction occurred in 2019, where FCFF decreased to 1,775 million USD from the previous year's 2,234 million USD. This was followed by a sharp recovery in 2020, reaching a peak of 3,039 million USD.
- EV/FCFF Ratio Volatility
- The EV/FCFF ratio demonstrates an oscillating pattern, alternating between high and low valuation multiples. High peaks were recorded in 2017 (50.00) and 2019 (49.82), with the 2019 spike being primarily driven by the decline in FCFF. Conversely, the ratio compressed to a range between 32.91 and 34.57 during 2018, 2020, and 2021, indicating periods where cash flow generation more closely aligned with the growth in enterprise value.
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