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Metric

EV/FCF

Category

Valuation Metrics

Definition

EV/FCF divides a company's enterprise value by its trailing twelve-month free cash flow — operating cash flow minus capital expenditures. Where EV/EBITDA and EV/EBIT rely on accrual-accounting measures of earnings, EV/FCF anchors the multiple to actual cash generated after the business has funded the capital investment needed to sustain and grow itself. It answers a direct question: at what multiple of real, spendable cash flow is the market pricing this business?

Because free cash flow already nets out capital expenditures, EV/FCF avoids the criticism most commonly leveled at EV/EBITDA — that EBITDA ignores the real cost of maintaining a capital-intensive asset base. A business with heavy depreciation and correspondingly heavy maintenance capex will show a much higher (more expensive) EV/FCF than its EV/EBITDA multiple suggests, revealing capital intensity that EBITDA-based multiples can mask.

Formula

EV/FCF = Enterprise Value / Free Cash Flow (TTM)

How GeminIQ calculates this metric

GeminIQ computes EV/FCF by dividing enterprise value by trailing twelve-month free cash flow, where free cash flow is TTM operating cash flow minus TTM capital expenditures (see [Free Cash Flow](/metrics/calculated-values/free-cash-flow)). Both enterprise value and free cash flow are built from as-filed SEC data — see the [Enterprise Value](/metrics/valuation-metrics/enterprise-value) page for how enterprise value is constructed.

FAQ

Q: How is EV/FCF different from EV/EBITDA?

A: EBITDA adds back depreciation and amortization on the premise that they are non-cash charges, but for capital-intensive businesses, depreciation approximates the real ongoing cost of maintaining the asset base. Free cash flow subtracts actual capital expenditures instead of ignoring them, so EV/FCF reflects the cash left over after that spending has already happened. A large gap between a company's EV/EBITDA and EV/FCF multiples — EV/FCF being meaningfully higher — is a signal of high capital intensity relative to reported earnings.

Q: Why can EV/FCF be volatile or misleading in a single period?

A: Capital expenditures are often lumpy — a company may complete a large facility build-out or equipment purchase in one year and spend comparatively little the next. A single period's free cash flow can understate normalized cash generation during a heavy investment year and overstate it during a lull. Comparing EV/FCF across several years, rather than relying on a single trailing-twelve-month figure, gives a more representative picture.

Q: Why might EV/FCF differ between platforms?

A: The two most common sources of divergence are how enterprise value is built (see the Enterprise Value page) and what counts as a capital expenditure — some platforms include acquisitions or capitalized software costs in capex, others exclude them. GeminIQ uses capital expenditures as reported on the as-filed cash flow statement, taken as an outflow.

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