Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
Trane Technologies plc, FCFE calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
The financial performance from 2018 to 2022 is characterized by moderate stability in operating cash flows contrasted with significant volatility in the cash available to equity holders. While the core ability to generate cash from operations remained relatively consistent, the free cash flow to equity exhibited substantial fluctuations, suggesting varying levels of capital expenditure and net borrowing activities over the five-year period.
- Net Cash Provided by Operating Activities
- Operating cash flows demonstrated a general resilience, fluctuating within a range of approximately 1.47 billion to 1.96 billion US dollars. A peak was reached in 2019 at 1,956,300 thousand US dollars, followed by a gradual decline through 2021, before a recovery to 1,698,700 thousand US dollars in 2022. This pattern indicates a stable foundation of cash generation from core business operations.
- Free Cash Flow to Equity (FCFE) Trends
- FCFE exhibited a high degree of variance, most notably in 2019 when it spiked to 3,183,300 thousand US dollars. This figure significantly exceeded the operating cash flow for that year, indicating a substantial net inflow of cash likely derived from financing activities or the sale of assets. Following this peak, FCFE experienced a sharp contraction, reaching a period low of 951,300 thousand US dollars in 2021, before rebounding to 1,404,900 thousand US dollars in 2022.
- Relationship Between Operating Cash and FCFE
- The divergence between operating cash flow and FCFE highlights shifting priorities in capital allocation. In most years, FCFE remained below operating cash flow, reflecting the deduction of capital expenditures. However, the anomaly in 2019, where FCFE was approximately 162% of operating cash flow, underscores a year of aggressive financing or liquidity injection. The subsequent decline in FCFE relative to operating cash flow in 2020 and 2021 suggests an increase in capital investment or a transition toward debt repayment.
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Price to FCFE Ratio, Current
Trane Technologies plc, current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 228,051,842 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in thousands) | 1,404,900) |
| FCFE per share | 6.16 |
| Current share price (P) | 177.74 |
| Valuation Ratio | |
| P/FCFE | 28.85 |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| Boeing Co. | — |
| Caterpillar Inc. | 20.71 |
| Eaton Corp. plc | 31.96 |
| GE Aerospace | 42.84 |
| Honeywell International Inc. | 8.86 |
| Lockheed Martin Corp. | 16.13 |
| RTX Corp. | 57.40 |
| P/FCFE, Sector | |
| Capital Goods | 41.93 |
| P/FCFE, Industry | |
| Industrials | 37.32 |
Based on: 10-K (reporting date: 2022-12-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
Trane Technologies plc, historical P/FCFE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 229,074,725 | 233,538,091 | 238,428,700 | 238,401,033 | 242,168,631 | |
| Selected Financial Data (US$) | ||||||
| Free cash flow to equity (FCFE) (in thousands)2 | 1,404,900) | 951,300) | 1,309,000) | 3,183,300) | 1,136,600) | |
| FCFE per share3 | 6.13 | 4.07 | 5.49 | 13.35 | 4.69 | |
| Share price1, 4 | 183.14 | 156.97 | 145.71 | 144.97 | 103.75 | |
| Valuation Ratio | ||||||
| P/FCFE5 | 29.86 | 38.54 | 26.54 | 10.86 | 22.11 | |
| Benchmarks | ||||||
| P/FCFE, Competitors6 | ||||||
| Boeing Co. | 120.43 | — | — | — | — | |
| Caterpillar Inc. | 24.03 | 16.36 | — | — | — | |
| Eaton Corp. plc | 28.68 | 24.43 | — | — | — | |
| GE Aerospace | 44.45 | — | — | — | — | |
| Honeywell International Inc. | 27.59 | 46.23 | — | — | — | |
| Lockheed Martin Corp. | 11.63 | 14.65 | — | — | — | |
| RTX Corp. | 26.71 | 35.07 | — | — | — | |
| P/FCFE, Sector | ||||||
| Capital Goods | 25.94 | — | — | — | — | |
| P/FCFE, Industry | ||||||
| Industrials | 25.07 | — | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Data adjusted for splits and stock dividends.
3 2022 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 1,404,900,000 ÷ 229,074,725 = 6.13
4 Closing price as at the filing date of Trane Technologies plc Annual Report.
5 2022 Calculation
P/FCFE = Share price ÷ FCFE per share
= 183.14 ÷ 6.13 = 29.86
6 Click competitor name to see calculations.
The valuation of the equity relative to Free Cash Flow to Equity (FCFE) exhibits significant volatility between 2018 and 2022, characterized by a divergent relationship between share price appreciation and cash flow generation.
- Share Price Performance
- A consistent upward trajectory is observed in the share price, which climbed from 103.75 US$ in 2018 to 183.14 US$ by the end of 2022. This represents a steady expansion in market value throughout the analyzed period.
- FCFE per Share Volatility
- Free Cash Flow to Equity per share demonstrated substantial instability. After a peak of 13.35 US$ in 2019, the value declined sharply to 5.49 US$ in 2020 and reached a period low of 4.07 US$ in 2021. A partial recovery to 6.13 US$ was recorded in 2022.
- P/FCFE Ratio Dynamics
- The P/FCFE ratio fluctuated inversely with FCFE per share. The ratio reached a minimum of 10.86 in 2019, coinciding with the highest cash flow generation. Conversely, the ratio expanded to a peak of 38.54 in 2021, driven by the simultaneous increase in share price and the contraction of FCFE. By 2022, the ratio moderated to 29.86 as cash flow began to recover.
The evidence indicates that the market valuation expanded at a rate exceeding the growth of free cash flow available to equity holders. This divergence resulted in a significantly higher valuation multiple in 2022 compared to the 22.11 ratio observed in 2018.
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