Watch FREE CASH FLOW to understand underlying valuation
Here's what investors and traders routinely miss: Free cash flow yield.
What is free cash flow? It is what is truly left over from running a business. If you purchased a business and then held it for yourself to reap the benefits, then you'd want to understand free cash flow. Search for it online to understand the nuances. A main element is that you add back in the depreciation, which is a non-cash charge, to earnings.
Since the market is an M&A (Mergers and Acquisitions) supported market, then you want to look at the market the same way that M&A investors do and they look at Free Cash Flow Yields. Why? Because FCF is what enables you to pay off debt if you own the company outright.
Keep in mind too that data isn't published until well after quarter-end, so you do need to pay attention to EARNINGS REPORT dates. This is an important reason why you need to know what price a stock was when it reported earnings, because that is when investors learn the new data point on free cash flow.
Long live logic and rational thinking.
Tim
9:50AM EST 3/28/2016 NEM 25.43 last.
Oh - buy NEM down at $21 if possible, because I think that is an attractive free cash flow yield; $700 million on 1.3 times sales on 7.7Billion = or 7.7% and exit at 6% FCF Yield.
What is free cash flow? It is what is truly left over from running a business. If you purchased a business and then held it for yourself to reap the benefits, then you'd want to understand free cash flow. Search for it online to understand the nuances. A main element is that you add back in the depreciation, which is a non-cash charge, to earnings.
Since the market is an M&A (Mergers and Acquisitions) supported market, then you want to look at the market the same way that M&A investors do and they look at Free Cash Flow Yields. Why? Because FCF is what enables you to pay off debt if you own the company outright.
Keep in mind too that data isn't published until well after quarter-end, so you do need to pay attention to EARNINGS REPORT dates. This is an important reason why you need to know what price a stock was when it reported earnings, because that is when investors learn the new data point on free cash flow.
Long live logic and rational thinking.
Tim
9:50AM EST 3/28/2016 NEM 25.43 last.
Oh - buy NEM down at $21 if possible, because I think that is an attractive free cash flow yield; $700 million on 1.3 times sales on 7.7Billion = or 7.7% and exit at 6% FCF Yield.
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