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Morgan Stanley  (NYSE:MS) Free Cash Flow: \$-13,043 Mil (TTM As of Sep. 2017)

Morgan Stanley's total free cash flow for the months ended in Sep. 2017 was \$2,903 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Sep. 2017 was \$-13,043 Mil.

Morgan Stanley's Free Cash Flow per Share for the months ended in Sep. 2017 was \$1.60. Its free cash flow per share for the trailing twelve months (TTM) ended in Sep. 2017 was \$-7.07.

During the past 12 months, the average Free Cash Flow per Share Growth Rate of Morgan Stanley was -175.40% per year. During the past 3 years, the average Free Cash Flow per Share Growth Rate was -67.00% per year. During the past 5 years, the average Free Cash Flow per Share Growth Rate was -52.30% per year. 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.

During the past 13 years, Morgan Stanley's highest 3-Year average Free Cash Flow per Share Growth Rate was 85.50% per year. The lowest was 0.00% per year. And the median was -45.05% per year.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Morgan Stanley Annual Data

 Nov07 Nov08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Free Cash Flow 23,447.00 33,693.00 94.00 2,301.00 1,171.00

Morgan Stanley Quarterly Data

 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Free Cash Flow -8,739.00 -5,753.00 -1,961.00 -8,232.00 2,903.00

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.

Note: GuruFocus does not calculate Free Cash Flow when Capital Expenditure is 0.

Morgan Stanley's Free Cash Flow for the fiscal year that ended in Dec. 2016 is calculated as

 Free Cash Flow (A: Dec. 2016 ) = Cash Flow from Operations + Capital Expenditure = 2447 + -1276 = 1,171

Morgan Stanley's Free Cash Flow for the quarter that ended in Sep. 2017 is calculated as

 Free Cash Flow (Q: Sep. 2017 ) = Cash Flow from Operations + Capital Expenditure = 3357 + -454 = 2,903

Free Cash Flow for the trailing twelve months (TTM) ended in Sep. 2017 was -5753 (Dec. 2016 ) + -1961 (Mar. 2017 ) + -8232 (Jun. 2017 ) + 2903 (Sep. 2017 ) = \$-13,043 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 Sep17, Morgan Stanley's Forward Rate of Return (Yacktman) % is

 Forward Rate of Return (Yacktman) % (Sep17) = Normalized Free Cash Flow / Price + Growth rate = 3.5927619 / 48.17 + 0.4239 = 49.85 %

* 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.

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