FCF Yield
Free cash flow per share divided by share price — the "earnings yield" of cash.
Definition
FCF Yield is the inverse of Price-to-FCF and shows how much cash a business throws off relative to its market cap. It is harder to manipulate than earnings yield because depreciation, working capital and capex all enter the numerator. Mature businesses with FCF yields above the 10-year Treasury are particularly attractive: you are getting a real, cash-backed return higher than the risk-free rate.
Formula
FCF Yield = Free Cash Flow / Market Cap
= FCF per share / Price per share
FCF = Operating Cash Flow - CapExWorked example
A company has $2B FCF and a market cap of $40B: FCF Yield = 5%. With the 10-year Treasury at 4.2%, the equity offers a 0.8% real cash spread — modest but real, and likely to grow with the business.
How ARIA Analyst uses it
ARIA computes FCF Yield with a normalised capex adjustment (averaging the last 5 years) so that one-off investment spikes do not distort the signal.
Related terms
Free Cash Flow (FCF)
Cash from operations minus capital expenditures — the cash a business actually generates for owners.
P/E Ratio
Share price divided by earnings per share — the most popular valuation multiple.
Owners' Earnings (Buffett)
Warren Buffett’s preferred cash-flow measure: net income plus non-cash charges minus maintenance capex.
Discounted Cash Flow (DCF)
Intrinsic value of an asset as the present value of its future cash flows.
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