Definition:

1-year Free Cash Flow per Share Growth Rate measures the percentage change in free cash flow per share over a one-year period. It indicates how effectively a company is generating cash flow relative to its share count, providing insights into financial health and operational efficiency.

Formula:

((Free Cash Flow per Share at End of Year - Free Cash Flow per Share at Start of Year) / Free Cash Flow per Share at Start of Year) * 100

How to use the metric:

Investors and analysts use this metric to assess a company's ability to generate cash flow on a per-share basis over time. A positive growth rate suggests improving financial performance, while a negative rate may indicate potential issues. It helps in comparing companies within the same industry or evaluating a company's performance over time.

Limitations:

This metric can be influenced by changes in capital expenditures, working capital, or share count, which may not necessarily reflect operational performance. It may not account for one-time cash flow events or seasonal variations, and it can be less meaningful for companies with volatile cash flows.

Applies to:

Industries with stable cash flows and capital structures, such as utilities, consumer goods, and mature technology companies, where free cash flow is a key performance indicator.

Doesn't apply to:

Industries with high volatility in cash flows, such as startups, biotech, or companies in heavy growth phases, where cash flow may be reinvested heavily into growth rather than being stable or predictable.

Summary:

The 1-year Free Cash Flow per Share Growth Rate is a useful metric for evaluating a company's cash-generating efficiency on a per-share basis over a year. It provides insights into financial health and operational performance but should be used with caution, considering its limitations and the context of the industry.