Switch to:
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Airgas Inc (NYSE:ARG)
Free Cash Flow
\$287 Mil (TTM As of Mar. 2016)

Airgas Inc's total free cash flow for the three months ended in Mar. 2016 was \$141 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Mar. 2016 was \$287 Mil.

Airgas Inc's free cash flow per share for the three months ended in Mar. 2016 was \$1.90. Its free cash flow per share for the trailing twelve months (TTM) ended in Mar. 2016 was \$3.85.

Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the Free Cash Flow Growth Rate using free cash flow per share data.

Definition

Free Cash Flow is considered one of the most important parameters to measure a companys earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA). However, when we look at the Free Cash Flow, we should look from a long term perspective, because any years Free Cash Flow can be drastically affected by the spending on Property, Plant, & Equipment (PPE) of the business in that year. Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.

Note: GuruFocus does not calculate Free Cash Flow when Cash Flow for Capital Expenditures is 0.

Airgas Inc's Free Cash Flow for the fiscal year that ended in Mar. 2016 is calculated as

 Free Cash Flow (A: Mar. 2016 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 743.935 + -456.899 = 287

Airgas Inc's Free Cash Flow for the quarter that ended in Mar. 2016 is calculated as

 Free Cash Flow (Q: Mar. 2016 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 231.411 + -90.148 = 141

Airgas Inc Free Cash Flow for the trailing twelve months (TTM) ended in Mar. 2016 was 68.024 (Jun. 2015 ) + 33.655 (Sep. 2015 ) + 44.094 (Dec. 2015 ) + 141.263 (Mar. 2016 ) = \$287 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Free Cash Flow is very close to Warren Buffetts definition of Owners Earnings, except that in Warren Buffetts Owners Earnings, the spending for Property, Plant, and Equipment is only for maintenance (replacement), while in the Free Cash Flow calculation, the cost of new Property, Plant, and Equipment due to business expansion is also deducted. There, Free Cash Flow is more conservative than Owners Earnings.

In Don Yacktmans calculation of forward rate of return, he uses Free Cash Flow for the calculation. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation.

This is what Yacktman said in his March 2012 interview - when the S&P 500 was at 1400:

If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. \$70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.

The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).

Therefore, as of Mar16, Airgas Inc's Forward Rate of Return is

 Forward Rate of Return (Mar16) = Normalized Free Cash Flow / Price + Growth rate = 3.50971429 / 141.64 + 0.0792 = 10.40 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

Free Cash Flow within a report period can be affected by management's decisions of capital spending. Therefore, it is important to look at long term when it comes to Free Cash Flow.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Airgas Inc Annual Data

 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Cash Flow from Operations 318 550 583 600 275 506 550 745 718 744 Cash Flow_CPEX -244 -267 -352 -253 -256 -357 -325 -355 -469 -457 total_freecashflow 75 283 231 347 19 150 225 390 249 287

Airgas Inc Quarterly Data

 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Cash Flow from Operations 173 191 197 145 173 203 224 148 141 231 Cash Flow_CPEX -89 -97 -109 -112 -118 -130 -156 -114 -97 -90 total_freecashflow 84 94 88 33 55 73 68 34 44 141
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to \$400 per referral. ( Learn More)