1Yr·

Good day to all,


I recently came across the "free cash flow" ratio again and realized that I had unfortunately paid too little attention to it.


There are 3 stocks $SIX2 (+0.72%)
$WAC (-0.93%)
$NEE (+1.64%) that I find interesting.


These companies regularly increase their profits and dividends.


However, if you look at the FCF of the above companies, you find that it is mostly negative. Just like the added cash and cash equivalents.


Furthermore, the dividend is paid out of the substance ( at $NEE (+1.64%) in any case).


However, I am confused by the consideration of the profit and the FCF. Since the profits of the 3 companies are rising steadily but the FCF is negative or just irregularly positive.

In the best case, this should rise steadily (as long as no major investments or acquisitions are made.


At least I am now no longer so sure whether one should give so much credit to the profit, if the FCF is often negative.


At $NEE (+1.64%) there are also relatively high debts of ~$70 billion.


How much do you like the whole thing? Maybe I'm looking at the whole thing wrong or have a mistake in my thinking 🤔

Would be pleased about your ways of thinking or possible food for thought 😊

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2 Comments

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If interest rates remain high for longer, this is bad for companies with weak free cash flow and high debt. This is because they do not generate the necessary funds for growth investments in their operating business and are more likely to be forced to raise fresh funds on the capital market at more expensive conditions.
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Profit can be influenced by cash flows that have nothing to do with the operating business, e.g. sale of a factory building or shares in participations. Therefore, the profit can be easily manipulated, cash flow is not.
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