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FCF yield

Free cash flow divided by a company's market value.

FundamentalsIntermediate

Definition

FCF yield expresses the cash return you would get if you owned the whole business at today's price. It lets you compare companies of different sizes and works well for mature, profitable businesses.

Formula

FCF yield = free cash flow / market cap

Watch out for

One year of FCF can be unusually high or low. Look at several years.

Example

Hypothetical exampleA company with $200 million of free cash flow and a $4 billion market cap has an FCF yield of 5%.

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