If you are currently a shareholder in Fortis Healthcare Limited (NSEI:FORTIS), or considering investing in the stock, you need to examine how the business generates cash, and how it is reinvested. What is left after investment, determines the value of the stock since this cash flow technically belongs to investors of the company. I’ve analysed below, the health and outlook of Fortis Healthcare’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio. View our latest analysis for Fortis Healthcare
What is Fortis Healthcare’s cash yield?Free cash flow (FCF) is the amount of cash Fortis Healthcare has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations. The two ways to assess whether Fortis Healthcare’s FCF is sufficient, is to compare the FCF yield to the market index yield, as well as determine whether the top-line operating cash flows will continue to grow.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
The business reinvests all its cash profits as well as borrows more money, to maintain and grow the company. This leads to a negative FCF, as well as negative FCF yield, in which case is not a very useful measure.
Is Fortis Healthcare’s yield sustainable?Does Fortis Healthcare’s future look brighter in terms of its ability to generate higher operating cash flows? This can be estimated by examining the trend of the company’s operating cash flow going forward. In the next couple of years, Fortis Healthcare is expected to deliver a decline in operating cash flow compared to the most recent level, which is not an encouraging sign. Below is a table of Fortis Healthcare’s operating cash flow in the past year, as well as the anticipated level going forward.
|Current||+1 year||+2 year|
|Operating Cash Flow (OCF)||₹9.90B||₹5.07B||₹6.54B|
|OCF Growth Year-On-Year||-48.78%||29.03%|
|OCF Growth From Current Year||-33.91%|
Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. I recommend you continue to research Fortis Healthcare to get a better picture of the company by looking at:
- Valuation: What is FORTIS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether FORTIS is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Fortis Healthcare’s board and the CEO’s back ground.
- Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.