Stock Meadow · Metric glossary · Profitability
Free Cash Flow Margin: formula and how to read it
Free cash flow margin shows how much of each sales dollar ends up as spare cash after the business has paid for its equipment and operations.
What is Free Cash Flow Margin?
Share of sales that becomes spare cash. Trailing free cash flow divided by revenue.
Stock Meadow groups it under Profitability, and shows it in tables as FCF margin.
Formula and a worked example
FCF margin = free cash flow ÷ revenue over the trailing twelve months
A company with $200 million of revenue and $30 million of free cash flow has an FCF margin of 15%. The numbers are made up for illustration.
How to read it
A higher FCF margin means more of each sales dollar is available for dividends, buybacks, debt repayment or reinvestment.
When Stock Meadow ranks stocks, a higher figure scores better.
Common pitfalls
- Free cash flow is lumpy. A year of heavy capital spending can lower it temporarily.
- Growth companies investing aggressively may show low or negative margins by choice.
- Working-capital swings can raise or lower a single year's figure.
How Stock Meadow handles gaps. Usually blank when free cash flow or revenue figures aren't available.
Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.
Stock Meadow models that use it
In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.
No fixed-recipe model scores it.
Read about every scoring model on the scoring models page.
Frequently asked questions
- Why look at free cash flow margin and not just profit margin?
- Profit includes accounting items that are not cash. FCF margin shows how much sales turn into actual spare cash, a useful cross-check on the quality of earnings.
- Is a higher or lower FCF margin better?
- When Stock Meadow ranks stocks, a higher figure scores better. That is a ranking convention, so read FCF margin alongside other measures and compare similar companies.
- Why is FCF margin blank for some stocks?
- It is usually blank when free cash flow or revenue figures aren't available. Stock Meadow leaves the figure blank rather than guessing it.
Use FCF margin in Stock Meadow
Filter on Free cash flow margin (TTM), score it in your own screen, and see how every stock compares. Free during the preview.
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