Free Cash Flow Yield Calculator

How it is calculated

The formula is FCF yield = free cash flow / market capitalization × 100. Free cash flow is the cash a business generates from operations minus its capital spending, usually taken for the last twelve months or a full year. Market capitalization is the share price multiplied by shares outstanding. Both numbers must be in the same currency and the same scale, for example both in millions, because the units cancel out in the ratio. Market cap must be above zero. Free cash flow may be negative, which produces a negative yield. The result is a percentage to two decimals. The tool uses equity value only, so debt and cash on the balance sheet are not considered, unlike an enterprise-value version.

Common mistakes

• Mixing scales, such as free cash flow in millions and market cap in billions. The yield is then wrong by a factor of 1,000, so put both in the same unit.
• Using operating cash flow instead of free cash flow. Capital expenditure must already be deducted, otherwise the yield is overstated.
• Dividing by revenue or by enterprise value and calling it this yield. This tool divides by market capitalization only.
• Using a single unusually good or bad year. One-off working-capital swings can distort free cash flow, so a multi-year average is often more telling.
• Treating a high yield as automatically cheap. It can also reflect falling or unsustainable cash flow, and a negative result simply means the company burned cash.