RECENT POSTS
Sunday, October 21, 2018
Charting Netflix Growth in Three Ways

Wednesday, October 17, 2018
Interesting Data on Interest Income

Thursday, October 11, 2018
The Decline of Sears in Three Charts

Wednesday, October 3, 2018
Buying Revenue At Any Cost...The (Not So) New Strategy For IPOs?

Sunday, September 30, 2018
Campbell Soup Gets Squeezed

Wednesday, September 26, 2018
Exchange Rate Effects on Cash

Monday, September 24, 2018
The Missing Unremitted Foreign Earnings

Tuesday, September 18, 2018
Thoughts on Structured Data

Sunday, September 16, 2018
Calcbench Goes to the Movies

Wednesday, September 12, 2018
The First-Ever Calcbench Webinar

Friday, August 31, 2018
Q&A: Ahmet Kurt and Researching Financial Data Quality

Friday, August 17, 2018
Leasing Costs and the Income Statement

Wednesday, August 15, 2018
Costs of Revenue, SG&A: Q2 Update

Tuesday, August 14, 2018
Who is affected by Turkey?

Wednesday, August 8, 2018
Lease Accounting and Return on Assets

Thursday, August 2, 2018
Latest Look at Leasing Liabilities

Thursday, July 26, 2018
Bargain Hunting in Calcbench

Wednesday, July 25, 2018
Chicken Soup for the Analyst’s Soul

Thursday, July 19, 2018
Calcbench Report: Share Repurchase Programs

Tuesday, July 17, 2018
Free Cash Flow, Big Filers and Small

Archive  |  Search:
Free Cash Flow, Big Filers and Small
Tuesday, July 17, 2018

From time to time Calcbench likes to do a quick analysis of financial data, to see what aggregate numbers among many companies might tell us about corporate performance. Today’s metric: free cash flow.

We last looked at free cash flow 12 months ago. “FCF” is a non-GAAP metric, 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.

Why is FCF useful? Because it indicates how much cash a company has for non-essential endeavors: investing more in R&D, making acquisitions, buying back shares, and so forth. So we wanted to see what the latest picture looks like, among the S&P 500 and among all public filers generally.

First is free cash flow among the S&P 500. We examined the average quarterly FCF per filer, from first quarter 2013 through first quarter 2018. As you can see in Figure 1 below, FCF fluctuates considerably from one quarter to the next — but the trend line, noted in red, clearly tilts downward.

What might that mean? Well, we know that cost of revenue has been rising lately, as has Sales, General & Administrative expense. It’s also worth noting that FCF in first quarter 2018 is up sharply ($502 million) relative to first quarter FCF in the prior three years, when it hovered below $350 million. That coincides with the first full quarter after last year’s corporate tax cut, which put a lot of cash into company coffers. Hmmm.

We could speculate that if FCF suddenly turns upward for the rest of 2018 — something we won’t know for many months yet — that might be tax reform at work. Once those quarterly statements arrive financial analysts might want to look more closely at specific companies to understand: is free cash flow rising because of smart cost management, or because of tax reform?

Everyone Else

We also have an FCF analysis for all public filers, in Figure 2 below. Here we can see the trend is decidedly upward, even if average FCF is much lower in absolute dollars (because we’re looking at smaller companies with smaller financial operations overall).

On the other hand, we also see that same phenomenon of first quarter 2018 FCF much higher than comparable first quarters in prior years. Tax reform? Something else? We don’t know. But as always — Calcbench does help you see the trends at large, so you can ask the right question for the specific companies that matter most to you.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.