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Free Cash Flow Yield Stock Screener
Use this screener to find the companies with the highest free cash flow yield during the last 5 years.
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Investors, who recognize the importance of cash generation, use the company's cash flow statements when analyzing its fundamentals. They recognize these statements offer a better representation of the company's operation. However, very few people look at how much free cash flow is available compared to the value of the company.
Cash in the bank is what every company strives to achieve. Investors are interested in what cash the company has in its bank accounts, as these numbers show the truth of a company's performance. It is more difficult to hide financial misdeeds and management adjustments in the cash flow statement.
The free cash flow yield calculation starts with the Company’s Cash Flow Statement. On the cash flow statement, find the Cash Flow from Operations line. Then subtract Capital Expenditures to derive Free Cash Flow. Free Cash flow is the money that is left over in the company’s bank accounts after paying the company’s bills and investing in new capital projects and equipment to help the company grow.
When free cash flow is positive, it indicates the company is generating more cash than is used to run the company and reinvest to grow the business. A negative free cash flow number indicates the company is not able to generate sufficient cash to support the business. Many small businesses do not have positive free cash flow as they are investing heavily to rapidly grow their business.
Using enterprise value as the divisor adjusts the free cash flow yield for the companies that hold debt, have a large amount of cash and have preferred shares.
In the ValueScreeners we are using two FCF ratios available to find bargain companies:
- 12 month trailing FCF
- 5 year average FCF (to have a complete business cycle)
To separate winners from losers in the returned FCF selection, you can order the stocks by their Piotroski score (default value), the price momentum (relative strenght) or other value investing datatypes (fe ERP5,MFI Rank, etc.). This way, you can avoid the value traps, companies that are trading at a discount because they deserve to.