Free cash flow yield measures a company's free cash flow as a percentage of its market capitalization. It is the cash-flow equivalent of earnings yield (inverse of P/E) and represents the return investors would receive if the company distributed all of its free cash flow to shareholders. FCF yield is widely regarded as one of the most useful single-number valuation metrics because it combines operating efficiency, capital discipline, and market pricing into one figure.
FCF Yield = Free Cash Flow (TTM) / Market Capitalization Where FCF = Operating Cash Flow − Capital Expenditures
GeminIQ divides TTM free cash flow (operating cash flow minus capex) by market cap at the filing period end. All inputs are from SEC filings.
A: Above 5% is generally attractive and suggests the market may be undervaluing the company's cash generation. Between 3% and 5% is moderate. Below 2% is expensive unless justified by high growth. The 10-year Treasury yield is a useful comparison point — if a company's FCF yield is below the risk-free rate, you need to believe strongly in future growth to justify the price.
A: FCF yield is based on actual cash generation after all necessary capital spending, which is harder to manipulate than accounting earnings. It also incorporates capital discipline — a company that generates the same earnings as a peer but requires less capex will have a higher FCF yield.
A: Differences in how capex is defined and how market cap is calculated are the main sources. GeminIQ uses as-filed capex and period-end market cap using basic shares.