It thus gives you a combined indication of free cash flow quality.
It is calculated as follows:
(Three year free cash flow growth X 0.7) – (Variability of quarterly free cash flow over the past 3 years X 0.3)
The FCF Score is thus put together of 70% Growth and 30% Quality
The higher the value the better as it means free cash flow growth is high or the variability of free cash flow is low or both.
Use the FCF Score along with Free cash flow yield and / or when you are looking for stable high dividend yield companies, as a high FCF Score will ensure a company has the cash to maintain a high dividend pay-out.