Switch to:
J.C. Penney Co Inc (NYSE:JCP)
Free Cash Flow
$-2,765 Mil (TTM As of Jan. 2014)

J.C. Penney Co Inc's total free cash flow for the three months ended in Jan. 2014 was $246 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Jan. 2014 was $-2,765 Mil.

J.C. Penney Co Inc's free cash flow per share for the three months ended in Jan. 2014 was $0.81. Its free cash flow per share for the trailing twelve months (TTM) ended in Jan. 2014 was $-12.35.

During the past 13 years, J.C. Penney Co Inc's highest 3-Year average Free Cash Flow per Share Growth Rate was 113.60% per year. The lowest was -46.90% per year. And the median was 14.15% per year.


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.

J.C. Penney Co Inc's Free Cash Flow for the fiscal year that ended in Jan. 2014 is calculated as

Free Cash Flow (A: Jan. 2014 )=Cash Flow from Operations+Cash Flow for Capital Expenditures
=-1814+-951
=-2,765

J.C. Penney Co Inc's Free Cash Flow for the quarter that ended in Jan. 2014 is calculated as

Free Cash Flow (Q: Jan. 2014 )=Cash Flow from Operations+Cash Flow for Capital Expenditures
=383+-137
=246

J.C. Penney Co Inc Free Cash Flow for the trailing twelve months (TTM) ended in Jan. 2014 was -966 (Apr. 2013 ) + -1147 (Jul. 2013 ) + -898 (Oct. 2013 ) + 246 (Jan. 2014 ) = $-2,765 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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 Jan14, J.C. Penney Co Inc's Forward Rate of Return is

Forward Rate of Return (Jan14)=Normalized Free Cash Flow/Price+Growth rate
=0.014/16.42+0
=0.09 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

Cash Flow from Operations, Forward Rate of Return, Purchase of PPE, Cash Flow for Capital Expenditures, Price-to-Free-Cash-Flow ratio, Free Cash Flow Per Share


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

J.C. Penney Co Inc Annual Data

Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14
Cash Flow from Operations 3191,4191,2661,2521,1571,573592820-10-1,814
Cash Flow_CPEX -398-535-772-1,243-969-600-499-634-810-951
total_freecashflow -79884494918897393186-820-2,765

J.C. Penney Co Inc Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
Cash Flow from Operations -305953-577-30-48645-752-708-737383
Cash Flow_CPEX -174-165-107-132-341-230-214-439-161-137
total_freecashflow -479788-684-162-389415-966-1,147-898246
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)
Free 7-day Trial
FEEDBACK
Hide