Free Cash Flow Yield Ratio

Free Cash Flow Yield is an analogue of the Operating Cash Flow per Share indicator. It is used by investors to assess the investment attractiveness of the company.

Alternative names of Free Cash Flow Yield:

  • Free Cash Flow Yield
  • FCFY.

What Does Free Cash Flow Yield Show?

Free Cash Flow Yield per share is analogous to the Operating Cash Flow per Share and shows the profitability of the company’s cash flow per single share. Stock market investors use this indicator to determine the appropriateness of the investments.

Formula of Free Cash Flow Yield

FCFY = Free cash flow per single share / Current market value of the share

Free cash flow is the difference between operating cash flow and volume of capital investments or expenses for the purchase of non-current assets.

Normative Value of Free Cash Flow Yield

The lower the value of the indicator, the less attractive it is to invest into the enterprise. And vice versa. Investors would always like to pay the lowest possible price for a certain amount of income.