FRS17 shortfall would amount to less than 25% of their free cash flow (profits plus depreciation).
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And even after the oil sectors recent rebound, stocks like Conoco (25, COC) and Unocal Corp.(36, UCL), at six times cash flow (net plus depreciation), are historically cheap.
Murchie avoids MLPs whose reported earnings don't exceed their dividends--even though industry executives protest that earnings mean less than cash flow, or earnings before depreciation and other noncash charges.
He scours Asia for enterprises that sell into large and expanding markets and have high or rapidly rising returns on equity, strong free cash flow (meaning net income plus depreciation minus capital expenditures, adjusted for working capital) and a focused long-term strategy.
In Watt's Latin America Equity fund, for example, you are getting shares of YPF, an integrated oil company in Argentina that trades at 6.5 times estimated cash flow (expected 1998 earnings plus depreciation). (The comparable ratio for Exxon is about twice that.) Buy the fund and you are buying YPF even cheaper, since the fund trades on the New York Stock Exchange at a 29% discount to net asset value.
The share price is only 3.5 times cash flow (in the sense of net plus depreciation) for 2010.
Some other measures he looks at include: Sustainable free cash flow, which he defines as earnings before depreciation and taxes minus historical depreciation.
The stock's multiples of earnings, cash flow (in the sense of net plus depreciation) and book value all stand at discounts to their respective five-year averages.
Selling for a ratio of six times enterprise value (market cap plus long-term debt) to EBITDA cash flow (earnings before interest, taxes, depreciation and amortization), Cemex looks cheap.
Hctor Medina, Cemex executive vice president of planning and finance, says Cemex's ratio of debt to cash flow (earnings before interest, taxes, depreciation and amortization) currently stands at 3.55 and should soon fall to 3.0.
Scaglia predicts the company will break even on a cash flow basis (earnings before interest, taxes, depreciation and amortization EBITDA) by 2003.
The stock also looks relatively less expensive according to the price-to-sales, price-to-cash flow (in the sense of net income plus depreciation) and enterprise multiples.
It sells at eight times my estimate of 2009 earnings, five times cash flow (in the sense of net income plus depreciation) and 1.8 times annual sales.
Wall Street is learning to disregard its long-running unprofitability and looking at its doubling of operating cash flow this year (that's net before depreciation, interest and taxes).
Roughly speaking, cash flow from operations is defined as net income plus depreciation, plus decreases in receivables and inventory, plus increases in accounts payable and deferred taxes payable.
Still, in that backdrop you can buy it at only one times revenue, seven times trailing earnings and three times cash flow (in the sense of net income plus depreciation).
We have come up with a rough measure, along the lines of the "cash flow" used by analysts to evaluate companies with heavy plant-and-equipment outlays--cash flow here referring to the sum of earnings and depreciation.
The first of our three stock screens selected companies in the Worldscope database whose prices today are at historically low multiples of earnings, cash flow (in the sense of net income plus depreciation) and book value.
Now at 30% of revenue, 90% of book value, 7 times 2009 earnings and 3 times cash flow (in the sense of net income plus depreciation), and with a 3.6% dividend yield, it's too cheap to pass up.
Rising revenues are nice, but big gains in operating income (net income before depreciation, interest and taxes) and cash flow from operations are even better.
He advises buying when pharma is trading at low multiples of earnings, sales, cash flow (in the sense of earnings before interest, depreciation, taxes and amortization but before capital spending) or all three.
In Watt's Latin America Equity fund, for example, you are getting shares of YPF, an integrated oil company in Argentina that trades at 6.5 times estimated cash flow (in the sense of expected 1998 earnings plus depreciation).
One of those I especially like now is May Department Stores (nyse: MAY - news - people ), America's largest such chain, at 50% of annual revenue, 4 times cash flow (in the sense of 2002 net income plus depreciation) and with a 4.1% dividend yield.
According to Peter Tasker of Dresdner Kleinwort Benson, depreciation equals around two-thirds of Japanese firms' cash-flow, profits only one-third.
It pays dividends out of a flow of cash called "funds from operations"--essentially, net income with depreciation added back in.
You calculate cash flow from ops, roughly speaking, this way: add to net income any noncash charges (such as for depreciation or an allowance for future tax bills), then add favorable changes in such balance sheet items as accounts payable and accounts receivable.
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