9/23/2023 0 Comments Price to free cashflowTo review the main differences between the two FCF types, reference the table below. In the two preceding posts, we discussed the formulas and steps to calculate: On the other hand, if the cash flow metric is “levered” free cash flow, then the matching valuation metric would be the equity value. If the cash flow metric used as the numerator is “unlevered” free cash flow, the corresponding valuation metric in the denominator is enterprise value (TEV). In addition, cash-flow generative companies are self-sufficient in being able to fund their growth plans themselves – and are thus worth more and valued at higher multiples by the market. The FCF yield metric matters because companies that generate more cash flow than they spend are less reliant on the capital markets for external financing.
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