Free Cash Flow Yield

Valuation
Updated Apr 2026 • Has calculator

Free cash flow expressed as a percentage of market capitalisation.

What is FCF Yield?

Free cash flow yield divides free cash flow — operating cash flow minus capital expenditure — by market capitalisation, expressing how much cash a company generates relative to its equity value. It is the inverse of a cash-flow-based P/E: a higher yield means investors pay less per dollar of free cash flow, suggesting a cheaper valuation. Unlike earnings-based metrics, FCF yield uses actual cash and is harder to manipulate with accounting choices, making it a favoured sanity check for value investors and a key input in discounted cash flow analysis.

Formula

FCF Yield = ((Operating Cash Flow − CapEx) ÷ Market Cap) × 100

Worked Example

Worked example — Apple Inc. (AAPL)

FY2024 (Sept 28, 2024)

Step 1  Operating cash flow: $118,254M
Step 2  Capital expenditure: $9,447M
Step 3  Free cash flow: $118,254M − $9,447M = $108,807M
Step 4  Market cap: $3,490,066M
Step 5  FCF Yield = $108,807M ÷ $3,490,066M × 100 = 3.12%
Step 6  → Apple generates $0.031 of free cash flow per $1 of market value

Source: Apple Annual Report FY2024 (2024-11-01)

Calculate FCF Yield

Net cash from operating activities (USD millions)

Purchases of property, plant, and equipment (USD millions)

Share price × shares outstanding (USD millions)

FCF Yield

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Not investment advice.

How to Interpret FCF Yield

< 2
Low — expensive or low cash generation
2 – 5
Moderate — reasonable for large-cap growth
5 – 10
Attractive — solid cash generation at fair price
> 10
High — deep value or temporary cash windfall

📚 Income Investing — Complete the path

  1. Dividend Yield
  2. FCF Yield
  3. Retention Ratio
  4. Sustainable Growth Rate
  5. PEG Ratio
Sources
  1. Apple Inc. — Annual Report FY2024
  2. CFA Institute — Equity Valuation, 4th ed.
  3. Investopedia — Free Cash Flow Yield