Free Cash Flow Yield
FCF Yield
Free cash flow yield is the surplus cash a business generates in a year as a percentage of its market cap. It is the earnings yield computed on cash that actually exists.
Formula
FCF Yield
FCF Yield (%) = Free Cash Flow ÷ Market Cap × 100
Benchmark: Higher is better; a positive earnings yield with a negative FCF yield is a warning
Reading the number
Earnings yield uses reported profit. FCF yield uses operating cash flow minus the reinvestment the business cannot avoid. For a company with honest accounting and modest capital needs the two are close. When they diverge, the FCF yield is the one to trust, because it is the money that could actually be paid out as dividends, used for buybacks, or left to pile up as cash.
Indian example
Related ratios
Glossary terms
From the research
How The Valuation Node Approaches Research
The research method behind The Valuation Node, how assumptions are stated, how sources are chosen, and how uncertainty is disclosed in every published analysis.
ValuationWhat Three Years of a Cash Flow Statement Reveals That One Year Hides
A single year of cash flow is a snapshot. Three years is a story. Learn what the trend reveals about earnings quality, funding, and sustainability.
ValuationComparing Two Companies on ROE, and Why the Higher One Is Not Always Better
Two companies can report the same ROE for very different reasons. DuPont analysis shows why an ROE built on leverage is not the same as one built on quality.