Free Cash Flow Yield

What it is\nFCF per share / share price. A 7% FCF yield means: for every $100 of stock you buy, the underlying business is generating $7 of distributable cash per year.\n\n## Why it cuts through accounting noise\nP/E uses reported earnings, which include non-cash items, accruals, and accounting choices. FCF yield uses actual cash that hit the bank.\n\nA software company reporting "5% earnings yield" but a "9% FCF yield" is genuinely earning more cash than its income statement shows — usually because depreciation overstates the real wear-and-tear on its capital assets.\n\nA company reporting "8% earnings yield" but a "2% FCF yield" is a red flag. Reported profit isn't turning into cash. Possibilities: aggressive revenue recognition, accruing receivables that won't collect, capitalising expenses, or working capital build that signals weak demand.\n\n## How to use it\n- > 8%: deeply cheap. Often value-trap territory but sometimes a real opportunity\n- 5–8%: healthy yield. Most quality businesses sit here\n- 3–5%: market average\n- < 3%: pricing in significant growth — needs to deliver