The cash flow statement brings balance to popular metrics focused only on a company's income statement. The price to earnings ratio (P/E) and charts of revenue do not assess the generation of cash available for new investments and paying down debt. It is common to read a news wire about a 10-Q (quarterly report) that only states, "beat on earnings, beat on revenue." This is an example of income statement focused analysis.
Free Cash Flow (FCF) can be tabulated by taking the Operating Cash Flow (OCF) and subtracting Capital Expenditures (CapEx). The FCF is measuring the available cash a company has to put into actions such as acquisitions for inorganic growth and to reduce debt. FCF is similar to free cash flow to firm (FCFF). In theme with the Do It Yourself (DIY) mentality, finding FCF can be an easy task. The following shows an example of how to obtain these figures from popular websites.
Operating Cash Flow (OCF)
Google Finance lists "Cash from Operating Activities" as the OCF value. The verbiage may vary from different sites, but the keywords are: cash, operating, and activities. From Skullcandy's (NASDAQ: SKUL) SEC Form 10-K 2015, the phrase used for OCF is "Net cash (used in) provided by operating activities." For the U.S. Securities and Exchange (SEC) forms go to sec.gov.
Capital Expenditure (CapEx)
Identifying the capital expenditures on a cash flow statement can be more complicated. This value is to include investments of tangible property (the opposite of brand value, goodwill, intangibles, etc.) such as 3D printers, office space, new carpet, etc. Google Finance lists "Capital Expenditures" as the CapEx value. From Glu Mobile's (NASDAQ: GLUU) SEC Form 10-K 2015, the phrase used for CapEx is "Purchase of property and equipment."
Google Finance did have matching figures for 2014 and 2013. In regards to 2015 they clearly sorted CapEx differently than how Glu Mobile listed it on their SEC Form 10-K 2015.
From time to time there will be some discrepancies compared to official sources. It's good to verify with SEC forms as time permits. Google Finance, FinViz and Seeking Alpha primarily have reliable numbers with small variance.
Free Cash Flow and the FCF Yield
Charting FCF for a company looks something like this: GoPro had $157.61 million in OCF for 2015. CapEx cost them $51.24 million. Thus, there FCF for 2015 was $106.37 million.
Included in the chart are two versions of the FCF Yield. One utilizes market capitalization as the denominator, the other enterprise value. When charting FCF for a company, Y/Y comparisons can depict health or deterioration. Tabulating a yield, a percentage relative to valuation, the metric can be quickly compared with other companies as to who offers a better value investment.
President Donald Trump put pressure on auto makers to keep manufacturing in the United States. The relationship does not appear to be completely adversarial as key CEOs later met with him at the White House for a positive meeting of the minds. Ford Motor Company claims to have canceled $1.6b for a new Mexico plant and diverted $700m towards domestic operations. The company's free cash flow (FCF) yield is strong as so is the dividend yield.
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Articles are written by Travis Brown at Seeking Alpha. Information covers stocks in the NASDAQ stock market and NYSE stock market.