Free Cash Flow Yield Calculator
Calculate free cash flow yield from annual free cash flow and market capitalization.
How to Use the Free Cash Flow Yield Calculator
Enter free cash flow and the company’s market capitalization or enterprise value, depending on the version used by the tool. The calculator expresses free cash flow as a percentage of the valuation base.
Practical Example
If free cash flow is USD 10 million and market capitalization is USD 200 million, free cash flow yield is 5%.
Factors That Affect FCF Yield
Free cash flow, share price, market capitalization, capital spending, working capital and one-time cash items can all affect the yield.
Frequently Asked Questions
What does a higher FCF yield mean?
It generally means more free cash flow is being generated relative to the valuation base.
Is FCF yield the same as dividend yield?
No. Free cash flow yield measures cash generation, while dividend yield measures cash distributed to shareholders.
Can negative free cash flow produce a negative yield?
Yes. Negative free cash flow results in a negative yield.
Interpreting Free Cash Flow Yield
Free cash flow yield relates cash generation to a valuation base such as market capitalization. A higher figure can indicate more cash flow relative to price, but capital intensity, one-time working-capital changes, debt and cyclicality can make comparisons misleading without additional context.
FCF Yield Comparison Considerations
Free cash flow yield relates cash generation to a valuation base such as market capitalization. A higher figure means more cash flow relative to that valuation base, but capital intensity, working-capital changes, debt and cyclicality can make comparisons misleading without additional context.
Methodology and Practical Limits
Free cash flow yield compares free cash flow with market value, but the free-cash-flow definition and equity-versus-enterprise-value denominator must remain consistent. Comparing companies with different capital structures or unusually volatile cash flows requires additional context.