Ranjit Thomas

Macy's Insecure Covenants: The Goodwill Trap

With reference to the last but one paragraph, earnings are after interest, pension expense and depreciation (which equates to capex). So it makes no sense to take earnings and then decrease it by these items to arrive at cash flow. In the last 12 months, M has generated $1.3Bn of free cash flow i.e. after paying interest and spending on capex. So the equity is trading at less than 3x FCF. It looks like there's enough margin even if the business deteriorates.