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Free cash flow is an useful and important valuation metric to know. Free cash flow enables the company to seek out more opportunities to enhance shareholders' value. It is computed by using the company's operating cash flow minus its capital expenditure. It is more reliable than operating cash flow, because it filters out the non cash items. The ability to generate a large positive net cash for the full year, is usually a sign of strength. However do note that negative free cash flow may not always be bad. A company may be using the money for big investments and if it pays off, more value for its shareholders will be unlocked.
Another valuation metric you can derive from free cash flow is
Price to Free Cash Flow...
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