Conformis Inc (NASDAQ:CFMS) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. 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 Conformis’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.
What is free cash flow?Conformis’s free cash flow (FCF) is the level of cash flow the business generates from its operational activities, after it reinvests in the company as capital expenditure. This type of expense is needed for Conformis to continue to grow, or at least, maintain its current operations. There are two methods I will use to evaluate the quality of Conformis’s FCF: firstly, I will measure its FCF yield relative to the market index yield; secondly, I will examine whether its operating cash flow will continue to grow into the future, which will give us a sense of sustainability.
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
After accounting for capital expenses required to run the business, Conformis is not able to generate positive FCF, leading to a negative FCF yield – not very useful for interpretation!
Does Conformis have a favourable cash flow trend?Can Conformis improve its operating cash production in the future? Let’s take a quick look at the cash flow trend Conformis is expected to deliver over time. Over the next two years, Conformis 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 Conformis’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)||-US$33.58m||-US$35.46m||-US$31.39m|
|OCF Growth Year-On-Year||5.60%||-11.47%|
|OCF Growth From Current Year||-6.52%|
Now you know to keep cash flows in mind, I recommend you continue to research Conformis to get a better picture of the company by looking at:
- Historical Performance: What has CFMS’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Conformis’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.