Rugby Estates (LSE:RES) Free Cash Flow : £4.57 Mil (TTM As of Jul. 2012)

Rugby Estates Free Cash Flow Chart

Rugby Estates Annual Data
	Trend	Jan03	Jan04	Jan05	Jan06	Jan07	Jan08	Jan09	Jan10	Jan11	Jan12
Free Cash Flow		Get a 7-Day Free Trial					-20.05	13.31	9.66	21.02	2.24

Rugby Estates Semi-Annual Data
	Jul03	Jan04	Jul04	Jan05	Jul05	Jan06	Jul06	Jan07	Jul07	Jan08	Jul08	Jan09	Jul09	Jan10	Jul10	Jan11	Jul11	Jan12	Jul12
Free Cash Flow	Get a 7-Day Free Trial														17.25	3.77	2.02	0.22	4.34

Rugby Estates 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.

Rugby Estates's Free Cash Flow for the fiscal year that ended in Jan. 2012 is calculated as

Rugby Estates's Free Cash Flow for the quarter that ended in Jul. 2012 is calculated as

Free Cash Flow for the trailing twelve months (TTM) ended in Jul. 2012 adds up the semi-annually data reported by the company within the most recent 12 months, which was £4.57 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.

Rugby Estates  (LSE:RES) 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 Jan12, Rugby Estates's Forward Rate of Return (Yacktman) % is

* 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.

Rugby Estates Free Cash Flow Related Terms

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Rugby Estates (LSE:RES) Business Description