Free cash flow (FCF) is a critical financial metric that offers a more transparent view of a company’s profitability in the context of equity valuation. Historically, both free cash flow profitability and free cash flow yield have demonstrated strong predictive capabilities, surpassing their earnings counterparts in performance.
In this research paper, we delve deeper into the importance of FCF, how to calculate FCF, how to interpret FCF and key considerations we should take when evaluating companies’ FCF.
Ziyu (Nelson) Qiao, Portfolio Research Analyst, Connect with Nelson on LinkedIn
Vince (Qijun) Chen, Director of Research, Connect with Vince on LinkedIn