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FRMO (FRMO) Free Cash Flow : $4.35 Mil (TTM As of May. 2014)


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What is FRMO Free Cash Flow?

FRMO's total free cash flow for the six months ended in May. 2014 was $4.35 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in May. 2014 was $4.35 Mil.

FRMO's Free Cash Flow per Share for the six months ended in May. 2014 was $0.10. Its free cash flow per share for the trailing twelve months (TTM) ended in May. 2014 was $0.10.

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.


FRMO Free Cash Flow Historical Data

The historical data trend for FRMO's Free Cash Flow can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

FRMO Free Cash Flow Chart

FRMO Annual Data
Trend Feb00 Feb01 Feb02 Feb03 Feb04 May12 May13 May14
Free Cash Flow
Get a 7-Day Free Trial 0.05 0.08 -0.58 1.05 4.35

FRMO Semi-Annual Data
Feb00 Feb01 Feb02 Feb03 Feb04 May12 May13 May14
Free Cash Flow Get a 7-Day Free Trial 0.05 0.08 -0.58 1.05 4.35

FRMO Free Cash Flow Calculation

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.

FRMO's Free Cash Flow for the fiscal year that ended in May. 2014 is calculated as

Free Cash Flow (A: May. 2014 )=Cash Flow from Operations+Capital Expenditure
=4.346+0
=4.35

FRMO's Free Cash Flow for the quarter that ended in May. 2014 is calculated as

Free Cash Flow (Q: May. 2014 )=Cash Flow from Operations+Capital Expenditure
=4.346+0
=4.35

For stock reported annually, GuruFocus uses latest annual data as the TTM data. Free Cash Flow for the trailing twelve months (TTM) ended in May. 2014 was $4.35 Mil.

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


FRMO  (OTCPK:FRMO) Free Cash Flow 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).

For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over seven years. The reason we use seven years is because research shows that seven years is the length of the typical business cycle.

Therefore, as of May14, FRMO's Forward Rate of Return (Yacktman) % is

Forward Rate of Return (Yacktman) % (May14)=Normalized Free Cash Flow/Price+5-Year EBITDA Growth Rate
=0.025/9.05+0.2
=20.28 %

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange 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.


FRMO Free Cash Flow Related Terms

Thank you for viewing the detailed overview of FRMO's Free Cash Flow provided by GuruFocus.com. Please click on the following links to see related term pages.


FRMO Business Description

Traded in Other Exchanges
N/A
Address
1 North Lexington Avenue, Suite 12C, White Plains, NY, USA, 10601
FRMO Corp is an intellectual capital firm identifying and managing investment strategies and business opportunities.
Executives
Steven Bregman director, 10 percent owner, officer: President HORIZON KINETICS LLC, 470 PARK AVENUE SOUTH, 4TH FLOOR SOUTH, NEW YORK NY 10016
Santa Monica Partners Lp director 1865 PALMER AVENUE, LARCHMONT NY 10538
Lawrence J Goldstein director 1865 PALMER AVE 108, LARCHMONT NY 10538
Jay P Hirschson director 747 GREENWICH ST, SUITE 400, NEW YORK NY 10014
Murray Stahl director, 10 percent owner, officer: CEO C/O HORIZON KINETICS LLC, 470 PARK AVE S 8TH FL S, NEW YORK NY 10016
Peter Doyle director, 10 percent owner, officer: Vice President, other: Secretary 470 PARK AVENUE SOUTH, 8TH FLOOR, NEW YORK NY 10016
Lester J Tanner director, officer: Secretary 100 PARK AVENUE SUITE 3302, NEW YORK NY 10017
Allan Kornfeld director 123 WILD DUNES WAY, JACKSON NJ 08527

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