Free Cash Flow
Definition
Cash generated by operations after subtracting capital expenditures — the cash available to pay dividends, buy back stock, reduce debt, or make acquisitions.
Explanation
Free cash flow (FCF) is considered the truest measure of financial health because it represents actual cash available to shareholders. FCF = Operating Cash Flow - Capital Expenditures. A company can report strong earnings while burning cash (through working capital changes, aggressive capitalization policies, or acquisition spending). Conversely, companies with modest earnings but strong FCF generation (like Berkshire Hathaway) may be undervalued. FCF yield (FCF/Enterprise Value) is the preferred valuation metric for Stoquity's FCF Forerunners portfolio.
Formula
FCF = Operating Cash Flow - Capital Expenditures
How Stoquity Uses This
Stoquity incorporates free cash flow analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.