Free Cash Flow Yield Plus Growth. Free cash flow yield (fcfy) we can take this relevant information and produce a ratio that is one of the most useful metrics in stock analysis: Free cash flow can be defined as a measure of financial performance calculated as operating cash flow minus capital expenditures.
It’s the amount of cash flow available to buy back stock, pay dividends, acquire other businesses, etc. The operating cash flow growth rate (aka cash flow from operations growth rate) is the long term rate of growth of operating cash, the money that is actually coming into the bank from business operations. The basic idea is that you can pay more for a company that’s growing its cash flows than for one that’s not growing its cash flows.
A higher free cash flow yield means that the company generates more cash with the same market valuation which is good for investors.
Even if oil and gas prices fall more than 20% from current levels, the company projects it will generate $2.5 billion in free cash flow between 2021 and. Q1 (quintile 1) represents the cheapest 20% of companies in terms of five year average free cash flow yield and q5 (quintile 5) the most expensive. It’s the amount of cash flow available to buy back stock, pay dividends, acquire other businesses, etc. Divided by the stock price (so that’s your “free cash flow yield”) plus the annual rate of growth in that cash flow while still making such payments.
