FCF Yield: What You're Actually Earning on the Market Cap Today

Why Yield Beats Multiple

Valuation multiples (P/E, EV/EBITDA, EV/Sales) are all reciprocals of yields. The inversion matters because yields are directly comparable against opportunity cost — a 10-year Treasury, investment-grade credit, or dividend yields on peer equities. A 25× P/E sounds abstract; a 4% earnings yield can be compared to a 4.5% 10-year. FCF yield is the highest-quality version of this idea because free cash flow is post-working-capital and post-capex — it's the cash an owner can actually take.

What the FCF Yield Card Shows

The FCF Yield card computes trailing FCF divided by enterprise value (unlevered yield) and trailing FCF divided by market cap (equity yield). Both are plotted over 20 quarters alongside the issuer's 5-year mean and ±1σ bands. A benchmark overlay shows the risk-free rate (10-year Treasury) and an investment-grade corporate yield curve so you can answer the opportunity-cost question at a glance. A decomposition view separates maintenance capex from growth capex so you can judge whether reported FCF is sustainable or temporarily inflated by capex deferrals.

Reading the Yield

Two interpretation rules matter more than the headline number. First, normalize for capex cycle: a mature business with a 7% FCF yield can't easily repeat it if the yield was lifted by skipping replacement capex — check the maintenance vs growth capex split. Second, compare equity yield vs unlevered yield: a large gap means the equity yield is leveraged — meaningful if debt is cheap, risky if refinancing is approaching. The best quality signal is a high FCF yield *and* a clean decomposition (maintenance capex isn't being deferred, working-capital isn't unwinding).

Where It Fits

FCF Yield is the valuation anchor for mature, cash-generative names; pair with Rule of 40 for growth names (where FCF yield is low or negative and not yet the right lens) and DCF for explicit forecasts. Cross-check with Cashflow for quality of the FCF itself — recurring cash earns a lower risk premium than lumpy cash.

Open the FCF Yield card → /app/stocks/AAPL/fundamentals