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Strategies & Market Trends : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: jbe who wrote (149)	11/4/1997 10:53:00 PM
From: TimmFred	Read Replies (1) \| Respond to of 253

jbe, I think the price/fcf ratio does have to be the starting point here. As you note, these ratios will vary among companies for a multitude of reasons, perhaps most centrally the expected rate of growth. However, I suspect most of the (impressive) abstract discussion occuring here goes ultimately to how to compensate for these outside factors in order to be able to compare p/fcf ratios "apples to apples." I for one would love to see a list of low-ratio companies which we could kick around in an effort to find a company or companies which stick out even after we try to compensate for the "external" factors.

To: jbe who wrote (149)	11/5/1997 8:53:00 AM
From: Andrew	Read Replies (2) \| Respond to of 253

jbe, it might be interesting to see if your screens can rank firms by what you might call their "FCF margin". That is: FCF margin(%) = FCF/Revenue*100% Even though this gives no information about valuation, it will allow you to compare firms on an "apples to apples" basis. It will show which companies are most solidly "in the black". A useful combination might be a method where you try to find companies with "high" FCF margin and "high" FCF growth rates, while being valued at "low" P/FCF ratios. This might be very informative about relative valuation. Andrew