Also called free cash flow margin
FCF margin
How many cents of spendable cash each dollar of sales leaves behind.
How it is calculated
FCF margin = free cash flow ÷ revenue
A fuller explanation of this one is still being written. The definition above is the short answer.
See also
- Free cash flow — The cash left for investors after keeping the business running. This is the number a DCF actually values, taken from the most recent fiscal year.
- Revenue — Total sales over the trailing twelve months, before any cost is subtracted.
- Target FCF margin — For a company not yet generating cash, the steady-state margin it is assumed to reach. The most fragile assumption in the model, because nothing in the history supports it.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
