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Herbalife Ltd's total free cash flow for the three months ended in Mar. 2014 was $132 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Mar. 2014 was $645 Mil.
Herbalife Ltd's free cash flow per share for the three months ended in Mar. 2014 was $1.31. Its free cash flow per share for the trailing twelve months (TTM) ended in Mar. 2014 was $6.10.
During the past 12 months, the average Free Cash Flow per Share Growth Rate of Herbalife Ltd was 50.60% per year. During the past 3 years, the average Free Cash Flow per Share Growth Rate was 31.90% per year. During the past 5 years, the average Free Cash Flow per Share Growth Rate was 31.80% per year. During the past 10 years, the average Free Cash Flow per Share Growth Rate was 28.50% per year.
During the past 11 years, Herbalife Ltd's highest 3-Year average Free Cash Flow per Share Growth Rate was 42.70% per year. The lowest was 2.60% per year. And the median was 29.05% per year.
Free Cash Flow is considered one of the most important parameters to measure a companys 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 years 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.
Herbalife Ltd's Free Cash Flow for the fiscal year that ended in Dec. 2013 is calculated as
|Free Cash Flow (A: Dec. 2013 )||=||Cash Flow from Operations||+||Cash Flow for Capital Expenditures|
Herbalife Ltd's Free Cash Flow for the quarter that ended in Mar. 2014 is calculated as
|Free Cash Flow (Q: Mar. 2014 )||=||Cash Flow from Operations||+||Cash Flow for Capital Expenditures|
Herbalife Ltd Free Cash Flow for the trailing twelve months (TTM) ended in Mar. 2014 was 182.634 (Jun. 2013 ) + 189.797 (Sep. 2013 ) + 140.715 (Dec. 2013 ) + 132.132 (Mar. 2014 ) = $645 Mil.
Free Cash Flow is very close to Warren Buffetts definition of Owners Earnings, except that in Warren Buffetts Owners 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 Owners Earnings.
In Don Yacktmans 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 Mar14, Herbalife Ltd's Forward Rate of Return is
|Forward Rate of Return (Mar14)||=||Normalized Free Cash Flow||/||Price||+||Growth rate|
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.
Herbalife Ltd Annual Data
|Cash Flow from Operations||80||143||184||271||273||285||389||511||568||773|
Herbalife Ltd Quarterly Data
|Cash Flow from Operations||117||120||137||142||168||138||214||226||196||191|