Last month the stock dropped from the $81 range to the 68 dollar range in one month.
Which is what I would like to point out, because the free cash flow is at 865 million dollars.
Inside the green , price has been at the $68 dollar range but the company had a lower cash flow even though it was increasing during that time. In hindsight, the cash flow is at discount to buy right now, meaning a conservative buy.
Now If price were to drop further and retest the $43 dollar range with a decreasing cash flow this would still be a good buy because, the company has shown that it can generate over 750 million in free cash flow at this price. The company has been able to generate over 750 million in free cash 2 times during the companies life time.
Now the best case scenario would be if price felll all the way to the $25 dollar range. Why?
Simple, at one time the company earned more then 650 million while also at one time the company
earned 70 million dollars in free cash flow, and the market respected the $25 dollar range after if had seen a decrease
in cash of 580 million dollars. Thats a half a billion dollars and the market didn't panic and close under the 25 dollar range, sure price did touch prices under it. However the market closed above or at that range.
When it comes to cash flow it is really the easiest to understand in business.
For instance, you work, you get paid, you pay bills , you save, at the end of the month you have money saved in your bank account.Then at the next month, you work, you get paid, you pay your bills , you save. Now your cash should be more depending if you saved or if something happened that caused you to spend your money.
That is what a cash flow is in business, if you take the time out, you can look at the market on bizbuysell.com and look for companies for sale. You can look at all of the companies in one sector and compare the cash flow from one company to another. buy doing so your able to see what is over priced and what is under priced and what is priced right.
In an essence that is the exact same thing in the stock market, however there just isn't enough companies with the exact market caps or cash flows to be able to compare to one another to find value.
Which is why you kind of have to use judgement on cash flow analysis along with to find value.