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lee
I am looking at the debt/FCF ratio for FLS. The annual financial
posted Sep 16 '13 by lee
I am looking at the debt/FCF ratio for FLS. The annual financial sts. show cash from operations = $517.10, capital exp = $0, FCF = $381.60, LT Debt = $869.10, and Debt/FCF = -9.03. I thought FCF = cash fm ops- cap ex. However, here the cap ex =0, so I calculated FCF as $517.10, not the $381.60 shown. What am I missing in the calculation?
Also, using the LT Debt and FCF from the fin sts as shown above, I came up with a Debt/FCF = 2.28 instead of negative 9.03. Again, where am I going wrong with this calculation? I've run into this "negative" debt/FCF ratio result based on positive FCF and debt on several stocks in the past, and would like to understand how this is calculated. Thanks in advance for your help.

ALEX
Re: Debt/FCF ratio for FLS
posted Sep 16 '13 by alex
Re: Debt/FCF ratio for FLS
Lee, THANK YOU for the good question! There were 2 issues with Debt/FCF ratio:

1. Stock2own did not show discovered Free Cash Flow values correctly.

Recently, we noticed that some financial web sites, including msn, started to add calculated Free Cash Flow values into Cash Flow Statement. At the same time, there are certain number of stocks where we could not correctly identify Capital Expenditures, therefore discovered Free Cash Flow seems like a good choice to use.

While all algorithms were adjusted to use discovered FCF values, stock2own kept showing calculated numbers, which created inconsistency. This problem has been resolved and if there is a FCF value (either annual or quarterly, or both) available, this is the value that is going to be used to calculate Debt/FCF Ratio and this is the value that is shown now.

In case of FLS, you can see that FCF in the last 2 quarterly statements is negative and therefore Debt/FCF was negative. You can also check msn web site, for example of reported FCF numbers (second bottom line):

http://investing.money.msn.com/investments/stock-cash-flow/?symbol=US%3AFLS&stmtView=Qtr

2. Stock2own is using most up to date value for a LT Debt to calculate Debt/FCF Ratio. And this number usually can be found in a quarterly statement, which guarantee that even if the company had 0 debt as of latest annual statement, it could borrow in a recent quarters and therefore LT Debt will be reported in the quarterly statement only.

It seems logical, but stock2own mistakenly used quarterly FCF value and compared it with LT Debt. This is incorrect approach, we cannot mix long term debt with a short term FCF values. I have fixed this issue as well, and LT Debt/FCF Ratio calculated as a most up to date LT Debt (usually from a quarterly statement) divided by Annual FCF value.

Therefore if you check Debt / FCF Ratio for FLS it is 2.23 as of now:

LT Debt/FCF Ratio = Qtr LT Debt / Annual FCF = 849.20 / 381.60 ~ 2.23

Please, keep in mind, all the rest of the stocks are being updated now, it will take some time, so it is possible to see incorrect values for several more hours.

Sorry for the mistake and thanks again for your help!

ALEX
Quarterly Statements on msn
posted Sep 16 '13 by alex
Quarterly Statements on msn
If you are going to use quarterly statements on msn web site, please, note that Cash Flow Statement reportes cumulative numbers - sum of values since last annual statement: in the header, in the line "Period Covered" it states something like "Q1-Q3".

HASENHUETL
Hi Alex,
posted Jan 02 '14 by hasenhuetl
Hi Alex,

regarding the aspect of CUMULATED quarterly CF numbers, would you advise not to QUARTERLY CF numbers from S2O, or is there a way to fix this?

Many thanks

ALEX
There is a reason why we do not show cumulated quarterly numbers on
posted Jan 03 '14 by alex
There is a reason why we do not show cumulated quarterly numbers on stock2own – it is very difficult to see quarter-over-quarter growth if you check cumulated numbers. All numbers will always grow, unless business started to do really really bad and start losing money and get into negative territory.

Usually, we are using quarterly numbers just as a short term estimate of how well the company is doing. On stock2own you can see them in the “Fin Statements” section in a form of a chart and in the Quarterly Statements section, where they presented in a table with quarter-over-quarter growth rates. If we show cumulated numbers in any of those places, that would be a mistake – charts will always be pointed up and growth rates will either be incorrect or really confusing.

Therefore, I do not think there is something in stock2own QUARTERLY numbers that has to be fixed. In fact, stock2own does some extra work to get real numbers and show them correctly.

In the post above I was trying to emphasize the difference in data representations on different web sites. For example, if you compare quarterly numbers for “cash” for the same company from msn and from yahoo, you will see different numbers. Just be aware of that.

I like to use “real” quarterly numbers (just like yahoo presents it) – it is consistent with annual statements (we show the same type of data in both places) and it is easy to see quarter-over-quarter changes, which is really important. So, if you like to see real, not cumulated, data, S2O is doing a good job for you here.

Does it answer your question?

HASENHUETL
Thanks for the explanation regarding the QUARTERLY cash flow numbers.
posted Jan 05 '14 by hasenhuetl
Thanks for the explanation regarding the QUARTERLY cash flow numbers. I always found MSN odd in that regard, because for Q2 and Q3 of a company's financial year they show additionally cumulated numbers, while they do not do this for Q4 results... And with companies having defined their financial years start / end dates differently, there is not always the same quarter in the same column, which I always found makes it cumbersome to find the right numbers. However, back to S2O: I appreciate the extra effort you put in to get the real quarterly numbers - really helpful due to reasons above. Where I get confused: if you look eg at MSFT quarterly results, S2O shows a negative CF from operations in the quarters ending Mar '13 and Jun '13. MSN however shows a positive CF from operations for both those quarters. Is this matter of CF definitions, or reading out the MSN data, or maybe I just get something wrong. Many thanks.

ALEX
QUARTERLY cash flow numbers
posted Jan 06 '14 by alex
QUARTERLY cash flow numbers
Seems that msn web site has changed their format for quarterly numbers. I can see numbers for the last 3 quarters only AND cumulated numbers on the same statement. And it looks like that created some sort of a mess in stock2own. Sorry about that and THANK YOU for paying attention! I’m on it and will keep you guys updated.

ALEX
QUARTERLY cash flow numbers look good!
posted Jan 11 '14 by alex
QUARTERLY cash flow numbers look good!
I have resolved the issue with quarterly numbers. I think it is safe to say that you can use it from stock2own.com :-) THANKS again for bringing it up!

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