The power of free cash flows: Investment implications

In the first part of this series, we saw how businesses can be classified on the basis of the strength of free cash generation and earnings growth. We also saw the most rewarding types of companies in the second part. Then in the third part, we studied businesses that have failed to grow their earnings despite generating free cash flows and those that generated neither free cash flows nor earnings growth. The table 'Free-cash-flow growth of Marcellus' CCP PMS companies' shows the compounding of free cash flows of the non-financial-services companies in Marcellus' Consistent Compounders Portfolio (CCP) and how that compares against their historical share-price performance. The following are the key conclusions from it: 1. Free-cash-flow compounding of these stocks has been healthy and consistent a

This article was originally published on October 01, 2021.