Free Cash Flow as Value Criterion Message Board

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Strategies & Market Trends : Free Cash Flow as Value Criterion

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To: Reginald Middleton who wrote (190)	11/10/1997 9:09:00 PM
From: jbe	of 253

Reginald, may I repeat what is fast becoming my motto once again: There Is More Than One Way To Skin a Cat. It is true that I personally can't ascertain a fair price by "simply looking at free cash flow." I can't, because I personally do not have the financial expertise to do so. However, there are some highly qualified financial analysts who do just that, including the gentlemen who wrote the book (Cash Flow and Security Analysis) that I cite in my opening post. And they do have a method for projecting discounted future free cash flows, and for ascertaining a fair price. The mathematical formulae they use are a bit too complex for me, but you might take a look at them. This is not to say that their method is the ONLY way to value stocks. In my opinion, in these matters, as in any other area of life, there is no ONE SINGLE WAY. As for my dwelling on "pure" free cash flow, I do so for a specific reason. It seems to me that we have first to establish just what a given company's present and past free cash flow was/is, before we can even think of projecting what it will be in the future.

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