Definition:

1-year Operating Cash Flow Growth Rate measures the percentage change in a company's operating cash flow over a one-year period. It indicates how well a company is generating cash from its operations compared to the previous year.

Formula:

((Operating Cash Flow in Current Year - Operating Cash Flow in Previous Year) / Operating Cash Flow in Previous Year) * 100

How to use the metric:

This metric is used to assess a company's financial health and operational efficiency. A positive growth rate suggests improved cash generation from core business activities, while a negative rate may indicate potential issues in generating cash.

Limitations:

The metric can be influenced by one-time events or accounting changes, which may not reflect the company's ongoing operational performance. It also does not account for cash flow seasonality or industry-specific factors.

Applies to:

This metric is particularly useful in industries with stable cash flows, such as utilities, consumer goods, and manufacturing, where consistent cash generation is crucial.

Doesn't apply to:

Industries with volatile cash flows, such as startups, technology, and biotech, may not benefit as much from this metric due to irregular cash generation patterns and high reinvestment needs.

Summary:

The 1-year Operating Cash Flow Growth Rate is a valuable tool for evaluating a company's ability to generate cash from its operations over time. While it provides insights into operational efficiency, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's financial health.