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Many investors believe that a company’s free cash flow is one of the more important fundamental metrics in evaluating an equity investment. Some have argued that Wall Street’s focus on revenue and earnings, which are more easily manipulated through accounting, without direct concern for calculating the actual money that a business is generating.

Free cash flow (FCF) is operating cash flow minus capital expenditures. FCF is the cash that a company made after paying out the money required to maintain and/or expand the business. Free cash flow enables a company to pursue acquisitions and growth initiatives, among other options. FCF may also allow a company to initiate or increase dividends.

I started this screen for strong FCF equities by limiting it to mid caps (companies with market valuations of $2-$10 billion). I screened for only those that have 10% Earnings Per Share over the past 5 years and a current price to FCF of fewer than 10. I then limited the screen to companies that work in a high technology industry and/or Sector. The following six companies are the ones I discovered that met all the criteria.

Symbol

Company

Industry

Market Cap

P/E

P/FCF

(NYSE:ATK)

Alliant Techsystems Inc.

Aerospace/Defense Products & Services

$2.28 B

7.29

7.83

(NYSE:LLL)

L-3 Communications Holdings Inc.

Aerospace/Defense Products & Services

$8.37 B

9.56

7.15

(NASDAQ:MU)

Micron Technology Inc.

Semiconductor- Memory Chips

$8.45 B

5.78

4.56

(NASDAQ:NVLS)

Novellus Systems, Inc.

Semiconductor Equipment & Materials

$3.02 B

9.93

8.96

(NYSE:TER)

Teradyne Inc.

Semiconductor Equipment & Materials

$2.63 B

8.07

5.48

(NYSE:VSH)

Vishay Intertechnology Inc.

Semiconductor - Broad Line

$2.38 B

6.88

5.95

While on its own, free cash flow is likely insufficient to base an investment decision, it is an important metric and one that is rarely provided. Such information can help you get a greater understanding of the fundamentals of businesses and identify proper investments.

Source: 6 Tech Companies With Strong Free Cash Flow