What are some common investing cash flow ratios and benchmarks that you use or follow?

Understanding the capital expenditure ratio is vital for assessing a company's investment strategy. This ratio reveals how much of a company's cash flow is allocated towards acquiring fixed assets for future income generation. A high ratio may signify aggressive business expansion or innovation, potentially signaling growth prospects. Conversely, it implies limited liquidity for dividends or debt reduction. Conversely, a low ratio may indicate operational efficiency or maturity, but could also suggest stagnation. Typically falling between 10% and 30%, this ratio varies by industry and business cycle. Evaluating this metric empowers investors to gauge a company's financial health and growth trajectory effectively.

The CapEx ratio is a valuable tool for assessing a company's investment capacity and financial health. When assessing this ratio, it's essential to consider: - Industry context, particularly in capital-intensive sectors - Historical trends - Company's strategic direction - Economic conditions - Other financial metrics such as ROIC, FCF, and debt-to-equity ratio However, it's crucial not to evaluate the CapEx ratio in isolation. Instead, interpret it alongside other metrics, industry trends and the company's strategy for a comprehensive evaluation of its financial health and growth potential.

The Free Cash Flow to Sales ratio is a vital metric that reveals how efficiently a company converts sales revenue into free cash flow, reflecting its operational strength and financial health. A high ratio signals robust cash generation, indicative of profitability, liquidity, and adaptability. Conversely, a low ratio may signify challenges in generating cash from sales, possibly due to narrow margins, elevated expenses, or substantial investments. Typically falling between 5% and 15%, this ratio varies across industries and growth stages. Understanding and monitoring this ratio can offer valuable insights into a company's performance and potential trajectory.

The Cash Return on Invested Capital (CROIC) ratio is a crucial metric for investors assessing a company's performance. It provides insights into how effectively a company utilizes its invested capital to generate cash flow. By dividing free cash flow by invested capital (long-term debt + shareholders' equity), this ratio paints a clear picture of value creation. Understanding CROIC is essential for investors. A high ratio suggests the company is efficiently utilizing its capital, indicating strong value creation. Conversely, a low ratio implies inefficient capital usage, potentially signaling value destruction. Typically, a CROIC benchmark falls between 10% and 20%, but this varies across industries and risk levels. I

A high ratio, ideally between 20% to 40%, signals a robust ability to service debts. This strength reduces financial risk and may enhance credit ratings. Conversely, a low ratio indicates potential challenges in meeting debt obligations, heightening financial risk and potentially lowering credit ratings. For investors, this metric serves as a vital indicator when assessing investment opportunities. It provides valuable insights into a company's financial stability and its capacity to manage debt effectively. Understanding the cash flow to debt ratio aids in making informed investment decisions tailored to individual risk preferences and industry standards.

Cashflow is often considered as the lifeblood of a company, and the cash flow per share ratio (CFPS) is frequently preferred over earnings per share (EPS) as it reflects actual cash flow, which is less prone to accounting manipulations. Consistent increases in CFPS may suggest improved operational efficiency or expanding market opportunities. a decline in CFPS could indicate challenges in generating cash flow or increased expenditures on capital investments. While CFPS is a useful metric for assessing a company's cash-generating ability, it should be considered in conjunction with other financial ratios and within the context of the company's industry, growth stage, and overall strategy for a comprehensive financial analysis.

This ratio reflects how much cash a company generates per outstanding share, directly impacting shareholders' returns. A high ratio indicates healthy cash flow, supporting dividends and reinvestments. Conversely, a low ratio may signal limitations in shareholder returns. Considering industry benchmarks and earnings levels, investors can gauge a company's financial health and potential.

As a credit analyst, I often delve beyond the standard cash flow ratios to uncover hidden insights. While the Operating Cash Flow Ratio and Debt Service Coverage Ratio provide essential information, I also pay close attention to: Cash Flow from Investing - Cash Flow from Financing - Cash Flow Margin To assess an investment relative to its peers, I often compare these ratios to industry-specific benchmarks. However, I also consider the company's unique business model and external factors that might influence its cash flow, such as economic conditions, regulatory changes, and competitive pressures.