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Meta Platforms' High Free Cash Flow Yield Contributes To My Buy Rating

Aug. 12, 2022 9:00 AM ETMeta Platforms, Inc. (META)4 Comments
Frederik Mueller profile picture
Frederik Mueller


  • At the current stock price, Meta Platforms has a Free Cash Flow Yield [TTM] of 7.29%, currently making it a less risky investment than in previous years.
  • Meta Platforms' current stock price is no longer based on high growth expectations.
  • Additionally, Meta Platforms has a P/E [FWD] Ratio of only 17.37, which is 31.61% below its average of the last 5 years (25.40).
  • While assuming a Revenue and EBIT Growth Rate of only 5% for Meta Platforms for the next 5 years, my DCF Model calculates a fair value of $203.13.
  • The fair value of $203.13 according to my DCF Model, results in an upside of 13.80% for Meta Platforms, showing that the company is currently an attractive buy.

Meta logo is shown on a device screen

Fritz Jorgensen

Investment Thesis

  • The Seeking Alpha Quant Ranking shows attractive results for Meta Platforms (NASDAQ:META): the company is ranked 9th (out of 62) within the Interactive Media and Services Industry and 71st (out of 251) within the Communication Services Sector.

This article was written by

Frederik Mueller profile picture
I specialize in constructing investment portfolios aimed at generating additional income through dividends. My focus lies on identifying companies with significant competitive advantages and strong financials that can provide you with an attractive Dividend Yield and Dividend Growth, thus enabling you to augment your dividend income annually. By combining high Dividend Yield and Dividend Growth companies, you can gradually reduce your dependence on the broader stock market fluctuations.I also assist you in achieving a well-diversified portfolio across various sectors and industries. This diversification strategy aims to minimize portfolio volatility and mitigate risk. I also suggest incorporating companies with a low Beta Factor, which further contributes to reducing the overall risk level of your investment portfolio. My suggested investment portfolios commonly consist of a blend of ETFs and individual companies, emphasizing broad diversification and risk reduction.The selection process for high dividend yield and dividend growth companies within the investment portfolio is meticulously curated. I prioritize the pursuit of total return, encompassing both capital gains and dividends, rather than solely focusing on dividends in isolation. This approach ensures that your portfolio is designed to maximize returns while considering the full spectrum of potential income sources. By leveraging my expertise, you can benefit from a well-crafted investment portfolio that aims to generate extra income through dividends, while reducing risk through diversification, and prioritizing total return.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of META, GOOG, AAPL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

What good is all this cash flow if they don't share any of it with us in the form of dividends. As an owner (albeit an infinitesimal one) I resent their unwillingness to share now that the business is out of the initial growth phase. Been starting to sell off my shares on days of strength.
lester98 profile picture
I like the stock, but if something doesn't change soon the trend is that FCF will go to zero very soon. See their most recent earnings presentation.

FCF Q4'21 = 12,562M
FCF Q1'22 = 8,528M
FCF Q2'22 = 4,450M (high capex)

Interested in your take on it.
Frederik Mueller profile picture
@lester98 Thank you very much for reading and for commenting on this analysis about Meta Platforms! I agree with you that Meta Platforms’ enormous investments will continue to significantly affect the operational results of the company in the short term. This is also one of the reasons for which I would not overweight the Meta Platforms stock in an investment portfolio, such as I have mentioned in this analysis. However, the company's enormous revenue and profit generated with Facebook and Instagram contribute to my buy rating on the stock, especially due to its current valuation.
@lester98 FCF isn’t net profit, it includes CAPEX, and Meta already said that they are reconsidering the amount of money and timeline of the investment in the Metaverse feature, also said it will make expenses only in its business priorities. So cash flows will improve from now on. Profits are huge as it’s revenues (117 bl in 2021 and 28,8 bl in q2 2022). Users growing at 4%. And the best alternative for visual and targeted Ads. No brainer.
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