On platforms like Dividend Data, you can find Free Cash Flow Per Share for stocks. This helps you make informed investment decisions.
Definition:
Free Cash Flow Per Share represents the amount of free cash flow attributable to each outstanding share of a company. It helps investors understand how much cash is available, after accounting for capital expenditures, on a per-share basis.
Calculating Free Cash Flow Per Share
The formula for Free Cash Flow Per Share is as follows:
Free Cash Flow Per Share = Free Cash Flow / Average Shares Outstanding
Where:
Free Cash Flow is the cash a company generates after cash outflows to support operations and maintain capital assets.
Average Shares Outstanding is the weighted average number of shares outstanding during the period.
Importance of Free Cash Flow Per Share in Financial Analysis
Investment Valuation: Offers insights into the company’s valuation and its ability to generate cash on a per-share basis.
Financial Health Indicator: A higher FCFPS indicates a company’s strong capability in generating cash, which is crucial for growth, dividends, and debt repayment.
Comparative Analysis: Useful for comparing the cash-generating efficiency of different companies within the same industry.
Free Cash Flow Per Share vs. Earnings Per Share
Unlike Earnings Per Share, which is based on net income, FCFPS focuses on actual cash flow, providing a more tangible measure of financial performance.
Analyzing Free Cash Flow Per Share
Trend Analysis: Examining the FCFPS over time can provide insights into a company’s growing or declining efficiency in cash generation.
Peer Comparison: Comparing FCFPS with industry peers to evaluate a company's performance relative to its competitors.
Dividend and Investment Potential: A company with a high FCFPS may have more flexibility to pay dividends or invest in growth opportunities.
Factors Influencing Free Cash Flow Per Share
Operational Efficiency: Efficiency in operations and management impacts the company's ability to generate free cash flow.
Capital Expenditure Requirements: High capital expenditures can reduce free cash flow, impacting FCFPS.
Share Count Changes: Stock buybacks or issuance can affect the number of shares outstanding, thereby influencing FCFPS.