Most of our money is indexed, but I have a small "testosterone induced trading account" that I mess around with sometimes.
Anyway, I came across this on seeking alpha, about using Free Cash Flow Analysis as a way to identify stocks that "might" generate a positive return on an individual basis.
Link: Invest Using Stocks' Price to Free Cash Flow -- Seeking Alpha
Here are a few formulas:
PFCF = Market Price/ (Cash flow per share -Capital Spending per share)
This ratio should be below 15 for best results.
FROIC = FCF per share / (long term debt per share + shareholders equity per share) x 100
This should be 20% or greater.
I was trying to figure some of this out this morning, but I am having trouble finding the numbers that I need to use. I tried using the key statistics on Yahoo finance for KO and this is what I came up with:
PFCF = Market Price/ (Cash flow per share(3.42 )-Capital Spending per share(.22))
FROIC = FCF per share (3.42)/ (long term debt per share (11.95) + shareholders equity per share(10.13))
PFCF: 53.51 / 3.20 = 16.7
FROIC: 3.42 / 22.08 = 15.48%
So KO does not meet the criteria of less than 15 and more than 20%, but then again I am not sure if I am using the right numbers to begin with.
Has anyone tried to analyze stocks this way? Where do you get the most up to date and accurate statistics for each stock?
Tell me what you guys think.