FCF Yield (FCF to EV) is equal to Free Cash Flow / Enterprise Value.
Free Cash Flow (FCF) = cash from operations - capital expenditure. Click the following link to see the definition of Enterprise Value.
Calculated On Trailing 12 Months
All the F-Score ratios are calculated on a trailing 12 months (TTM) basis.
This means the last twelve months (not the company’s financial year) is compared to the same period in the past. We do this to make sure that the screener data includes the latest, most up to date, financial results of the company.
How to use the ratio
Available as a screening ratio: Yes
Available as an output column ratio: Yes (Look for it under the Valuation heading)
How to select the highest FCF Yield companies
To find companies with the highest FCF Yield set the slider from 0% to 10%.
What is a good free cash flow yield?
This is a difficult question to answer. Our best answer is it depends.
If it's a high quality company a 7% Free Cash Flow Yield may be attractive but for a small company a 15% yield may be considered good.
Be careful of looking at a single year's FCF Yield alone as working capital movements (lower inventory and or accounts receivable) may temporary increase free cash flow generation which may reverse in the following year.
If Enterprise Value is negative
If the Enterprise Value of a company is negative, a value of 1 is used for calculation purposes. For example if not the EBIT / EV ratio would be a negative number.
We did this after the 2008 financial crisis. We were screening for deep value stocks at the time, and setting EV to 1 instead of NULL meant that securities with negative enterprise value would show up with extremely high ratios rather than disappeared from the screen.
The downside is that for companies with negative enterprise values you may for example see extremely high Free Cash Flow Yield (FCF/EV) or Earnings Yield (EBIT/EV) percentages – you are dividing with one).
The upside is that it makes it immediately obvious to you that you are looking at a negative Enterprise Value company.
This is exactly what you want as a deep value investor.