What it means
Free cash flow is operating cash flow minus capital expenditures. It's the cash a business has left over to return to shareholders, pay down debt, or reinvest beyond maintenance.
Why it matters
FCF is the cleanest single number for evaluating a business. Earnings can be massaged through accounting choices; FCF either showed up in the bank account or it didn't.
How to use it
FCF yield (FCF / market cap) is the most useful comparison metric. Anything above 8% in a steady business is worth a hard look. Below 3% in a non-growth business is a red flag.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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