Free cash flow is generally defined as a company’s operating cash flow minus capital expenditures. That is, it’s the money that remains after the company pays to maintain its assets and operations.

Technically free cash flow is a non-GAAP metric, which means we’re supposed to squint at it and wonder how reliable a company’s “FCF” really is— but in the real world, analysts have come to rely on FCF as an indicator of how much cash companies have to finance non-essential endeavors: buying back more shares, investing more in R&D, making acquisitions, and so forth.

So Calcbench decided to take a fresh look at FCF among the S&P 500 over the last few years, and the trend isn’t where one would like it to be. (We can do that with our Data Query Tool, which tracks non-GAAP metrics at the bottom of the page.) While FCF varies substantially from one quarter to the next, the trend is decidedly downward.

The trend line in red, above, shows that average FCF per quarter fell from just above $600 million in first quarter 2013 to $500 million in first-quarter 2017— a decline of nearly 17 percent.

Ah, but before we start predicting doom and gloom, what about FCF trends for all public filers? What do those numbers say? Take a look.

Average FCF starts from a much lower base, since the population includes many more companies with much lower revenue and expenditure. But the overall trendline for this group tilts upward, from the mid-50 millions in 2013 to the high 50 millions in 2017.

The next question is why FCF is fluctuating the way it is. That’s more difficult to answer, because FCF is a non-GAAP metric that companies can “adjust” in any number of ways. Our quick sketch of the numbers doesn’t capture that. It only captures a broad trend that might prompt financial analysts to look more closely at the FCF trends of specific companies they follow.

The SEC stresses that FCF “does not have a uniform definition and its title does not describe how it is calculated”—so if you want to report it, you need to describe how you calculate it and then reconcile the number back to GAAP-approved cash flows from operating activities. You also should refrain from hyping FCF as a pile of money available for any good idea that comes along; it might be needed to service debt covenants, for example.

Still… that red line in the chart above only points in one direction. If the company you follow keeps talking about growth via acquisition, or plans major R&D expansion, or has a debt obligation coming due soon, you may want to ask where the money to pay for that is going to come from. There may be less free cash laying around than we assume.

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