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Keurig Green Mountain Inc (NAS:GMCR)
Free Cash Flow
\$578 Mil (TTM As of Dec. 2015)

Keurig Green Mountain Inc's total free cash flow for the three months ended in Dec. 2015 was \$276 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Dec. 2015 was \$578 Mil.

Keurig Green Mountain Inc's free cash flow per share for the three months ended in Dec. 2015 was \$1.83. Its free cash flow per share for the trailing twelve months (TTM) ended in Dec. 2015 was \$3.74.

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.

Keurig Green Mountain Inc's Free Cash Flow for the fiscal year that ended in Sep. 2015 is calculated as

 Free Cash Flow (A: Sep. 2015 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 754.862 + -411.099 = 344

Keurig Green Mountain Inc's Free Cash Flow for the quarter that ended in Dec. 2015 is calculated as

 Free Cash Flow (Q: Dec. 2015 ) = Cash Flow from Operations + Cash Flow for Capital Expenditures = 334.33 + -57.911 = 276

Keurig Green Mountain Inc Free Cash Flow for the trailing twelve months (TTM) ended in Dec. 2015 was 91.018 (Mar. 2015 ) + 138.855 (Jun. 2015 ) + 71.785 (Sep. 2015 ) + 276.419 (Dec. 2015 ) = \$578 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 Dec15, Keurig Green Mountain Inc's Forward Rate of Return is

 Forward Rate of Return (Dec15) = Normalized Free Cash Flow / Price + Growth rate = 1.72171429 / 89.98 + 0.2858 = 30.49 %

* 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.

Keurig Green Mountain Inc Annual Data

 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 Cash Flow from Operations 13 30 2 38 -2 1 478 836 719 755 Cash Flow_CPEX -14 -22 -49 -48 -126 -283 -401 -233 -338 -411 total_freecashflow -1 8 -47 -10 -129 -283 77 603 382 344

Keurig Green Mountain Inc Quarterly Data

 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Cash Flow from Operations 64 273 321 230 -104 142 226 242 145 334 Cash Flow_CPEX -42 -61 -58 -103 -116 -100 -135 -103 -73 -58 total_freecashflow 21 212 263 127 -220 42 91 139 72 276
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