Many investors believe that a company’s free cash flow (FCF) is one of the more important fundamental metrics in evaluating an equity investment. Some have argued that Wall Street’s focus is 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 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.
Here, I have screened the market for domestic mid and large-cap companies that are in the technology sector. Amongst them, I looked for those that have a current price to FCF of under 10, with earnings per share growth of over 10% over the last 5 years. The search located seven companies:
Ticker | Company | Market Cap | P/E | P/FCF |
Hewlett-Packard Company | $71.06 B | 8.4 | 8.54 | |
Micron Technology Inc. | $8.08 B | 5.53 | 4.35 | |
Novellus Systems, Inc. | $3.15 B | 10.36 | 9.37 | |
SanDisk Corp. | $10.05 B | 7.88 | 7.21 | |
Symantec Corporation | $14 B | 24.38 | 9.17 | |
Teradyne Inc. | $2.6 B | 7.99 | 5.34 | |
Vishay Intertechnology Inc. | $2.38 B | 6.85 | 5.55 |
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
