Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Time Warner Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 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).
An analysis of cash flow metrics between 2013 and 2017 reveals a consistent upward trajectory in the firm's ability to generate liquidity, with both operating cash flows and free cash flow to the firm demonstrating significant growth over the five-year period.
- Cash Provided by Operations
- Operating cash flows remained relatively stable from 2013 to 2015, experiencing a marginal decline in 2014 before recovering in 2015. A notable acceleration in cash generation occurred in 2016 and 2017, where values rose to 4,683 million and 5,094 million US dollars, respectively. This represents an overall increase of approximately 37% from the 2013 baseline.
- Free Cash Flow to the Firm (FCFF)
- FCFF exhibited uninterrupted annual growth throughout the analyzed period. Starting at 3,919 million US dollars in 2013, the figure increased to 5,498 million by 2017. The most substantial expansion occurred between 2015 and 2016, during which FCFF grew by approximately 22.8%, signaling a sharp increase in the cash available to all capital providers.
- Relationship Between Operating Cash Flow and FCFF
- A consistent positive variance is observed where FCFF remains higher than cash provided by operations in every reported year. This pattern indicates that the adjustments to operating cash flow—typically the inclusion of after-tax interest expenses—consistently exceeded the firm's capital expenditures during this timeframe, thereby enhancing the total free cash flow available to the firm.
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Interest Paid, Net of Tax
Time Warner Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 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).
2 2017 Calculation
Cash payments made for interest, tax = Cash payments made for interest × EITR
= 1,202 × 11.79% = 142
Between 2013 and 2017, cash payments made for interest, net of tax, exhibited a general upward trajectory characterized by periodic volatility. Total outflows increased from 805 million USD in 2013 to 1,060 million USD by the end of 2017, representing an overall increase of approximately 31.6% over the five-year period.
- Interest Outflow Patterns
- A sharp increase in net interest payments was observed between 2013 and 2014, rising from 805 million USD to 1,057 million USD. A subsequent contraction occurred in 2015, where payments fell to 883 million USD. However, outflows rebounded in 2016 and 2017, stabilizing above the 1 billion USD threshold.
- Effective Income Tax Rate (EITR) Volatility
- The EITR demonstrated significant instability throughout the analyzed period. After starting at a peak of 33.00% in 2013, the rate dropped sharply to 17.00% in 2014. A recovery to 30.00% was noted in 2015, followed by a consistent downward trend that culminated in a period low of 11.79% in 2017.
- Correlation Between Tax Rates and Net Interest Payments
- The relationship between the EITR and net cash payments suggests an inverse correlation regarding the tax shield. The lowest recorded EITR of 11.79% in 2017 corresponds with the highest net cash payment of 1,060 million USD, indicating that a lower effective tax rate reduces the tax deductibility benefit of interest expenses, thereby increasing the net cash outflow.
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Enterprise Value to FCFF Ratio, Current
Time Warner Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 94,404) |
| Free cash flow to the firm (FCFF) | 5,498) |
| Valuation Ratio | |
| EV/FCFF | 17.17 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Alphabet Inc. | 53.15 |
| Comcast Corp. | 7.49 |
| Meta Platforms Inc. | 33.30 |
| Netflix Inc. | 25.87 |
| Walt Disney Co. | 19.20 |
Based on: 10-K (reporting date: 2017-12-31).
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
Time Warner Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 94,719) | 97,959) | 74,309) | 88,328) | 76,049) | |
| Free cash flow to the firm (FCFF)2 | 5,498) | 5,294) | 4,311) | 4,264) | 3,919) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 17.23 | 18.50 | 17.24 | 20.71 | 19.40 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 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).
3 2017 Calculation
EV/FCFF = EV ÷ FCFF
= 94,719 ÷ 5,498 = 17.23
4 Click competitor name to see calculations.
The analysis of the enterprise value to free cash flow to the firm (EV/FCFF) ratio from 2013 to 2017 reveals a period of consistent operational cash flow growth contrasted by volatility in total enterprise valuation.
- Enterprise Value Trends
- The enterprise value exhibited significant fluctuations over the five-year period. Following an increase from 76,049 million USD in 2013 to 88,328 million USD in 2014, the valuation experienced a decline to 74,309 million USD in 2015. A substantial recovery occurred in 2016, reaching a peak of 97,959 million USD, before slightly contracting to 94,719 million USD by the end of 2017.
- Free Cash Flow to the Firm (FCFF) Performance
- In contrast to the volatility of the enterprise value, the FCFF demonstrated an uninterrupted upward trajectory. Cash flows grew steadily each year, rising from 3,919 million USD in 2013 to 5,498 million USD in 2017. This consistent growth indicates a strengthening capacity to generate cash available to all capital providers.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio fluctuated between 17.23 and 20.71. A peak was observed in 2014 at 20.71, where the increase in enterprise value outpaced the growth in cash flow. Subsequently, the ratio trended lower, reaching 17.23 in 2017. This compression of the ratio, occurring simultaneously with rising FCFF, suggests that the market valuation became more conservative relative to the firm's cash-generating performance toward the end of the period.
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