FCF Yield Calculator
What Is FCF Yield?
Free Cash Flow (FCF) Yield measures how much free cash flow a company generates relative to its market capitalization. Formula: FCF Yield = Free Cash Flow / Market Cap x 100. A higher FCF yield often signals an undervalued stock.
How to Interpret FCF Yield
Above 10%: potentially undervalued. 6-10%: attractive value range. 3-6%: fair value. Below 3%: richly valued or priced for high growth.
FCF Yield vs. Earnings Yield
FCF yield is often more reliable than earnings yield because free cash flow is harder to manipulate than reported earnings. FCF represents the owner earnings actually available to shareholders.
FCF Yield Formula Variations
- Basic FCF Yield: FCF divided by Market Cap
- Levered FCF Yield: FCF after interest payments divided by Market Cap
- Unlevered FCF Yield: FCF before interest divided by Enterprise Value
Frequently Asked Questions
What is a good FCF yield?
A FCF yield above 6% is generally considered attractive, with yields above 10% suggesting potential undervaluation. Context matters - a high yield in a declining business is less valuable than a moderate yield in a growing one.
How do I calculate free cash flow yield?
Divide annual free cash flow (operating cash flow minus capital expenditures) by current market capitalization, then multiply by 100.
Why is FCF yield better than P/E ratio?
FCF yield is based on actual cash generated rather than accounting earnings, making it harder to inflate through non-cash adjustments. It directly shows the cash return per dollar invested.
What is the difference between FCF yield and dividend yield?
Dividend yield measures cash paid to shareholders. FCF yield measures total cash available - including what could be used for buybacks, debt repayment, or reinvestment.