Follow the cash to find better stocks

Cash performance is a better indicator of how well a company is doing than profits, says Phil Oakley. Here's how to crunch the numbers to reveal the truth.

In many ways, investing is all about cash. You invest cash in an asset and you expect more cash in return in the form of dividends, perhaps, and hopefully by selling your investment for more than you paid for it. It makes sense to look at companies in the same way.

A good company uses its investors' cash to invest in assets such as machinery, raw materials and property, then uses these to generate a lot more cash. The better it is at doing this, the better an investment it will make at the right price, of course.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Swipe to scroll horizontally
Operating cash flow£2,423m
Interest received£27m
Interest paid-£34m
Taxes paid-£528m
Capex-£177m
Asset sales£22m
Free cash flow£1,733m
Swipe to scroll horizontally
FCF per share239.3p
EPS249.5p
Difference-4%
Divi. per share (DPS)134p
FCF divi. cover1.8
Swipe to scroll horizontally
Sales£9,567m
FCF£1,733m
FCF margin18.1%
Swipe to scroll horizontally
FCF per share239.3p
Share price4,803p
FCF yield5.0%

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.