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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
Free cash flow can sometimes look deceptively undervalued when a company is under significant risk or where a company’s recent revenue and/or earnings are not from continuing business operations. While on its own, free cash flow is likely insufficient to base an investment decision upon, but 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.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.
Source: 7 U.S. Technology Companies Trading Under 10 Times Free Cash Flow