5yr Growth FCF equals the five year geometric average growth rate of a company’s Free Cash Flow. Free cash flow (FCF) is calculates as Cash generated by the operations of the company (cash flow statement) - capital expenditure.
It is shown as a percentage, for example 3.3%.
The geometric average gives you the growth over the period by using the product of their values (as opposed to the arithmetic average which uses their sum). We use the geometric mean because it penalises (negative growth) declined much more than the arithmetic mean does.
We USE Approximating Geometric Mean
We use a useful formula for finding the approximate geometric mean, as we already have the arithmetic mean and the standard deviation.
It is: Geometric Mean = arithmetic mean - 0.5 × (standard deviation)². It gives results very close to the correct Geometric Mean.
How to use the ratio
Available as a screening ratio: Yes
Available as an output column ratio: Yes (Look for it under the Growth heading)
How to select companies the highest growth in Free Cash Flow over 5 years
To find companies with the highest Free Cash Flow growth rate over five years set the slider from 0% to 10%.
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