Free Cash Flow Yield & Earnings Quality

Methodology

Data. Free cash flow is operatingCashflow − capitalExpenditures, both from Alpha Vantage's quarterly CASH_FLOW statement (the same source as Buyback Effectiveness). Trailing-12-month figures need all four recent quarters with every field populated. A company with a gap in its latest filing is left out. Earnings yield is trailing net income ÷ market cap, calculated the same way as FCF yield, so it differs from Equity Risk Premium's trailing-P/E-based figure. Any gap between the two yields on this page then reflects cash vs. accruals, not a different method.

Why this page. Valuations is industry-level (94 classifications) and multiple-based (P/E, EV/EBITDA, P/B), sourced from Damodaran. Equity Risk Premium is stock-level but earnings-based (trailing P/E vs. the 10-year Treasury). Neither asks whether the earnings behind a P/E turned into cash. A company can report healthy net income while spending heavily on capex, or recognizing revenue aggressively, so that free cash flow looks very different. FCF conversion (free cash flow ÷ net income) measures that. Below 100%, cash is lagging earnings. Above 100%, it's running ahead. Capex-heavy sectors (Utilities, Real Estate, Energy) should run lower conversion than asset-light ones (Information Technology, Communication Services). The sector chart's toggle checks that against the current data. It isn't meant to flag every capital-intensive business.

Correlation. The scatter runs Pearson (OLS) and Spearman rank correlation on FCF yield vs. earnings yield across the index, as on Factor Analysis. A strong, tight relationship near the 45° line means the two yields mostly agree. A weak one, or a cluster of names well below the line, means cash and accrual earnings tell different stories for part of the index.

Sector and company name, and the market cap for both yields, come from Sector Beeswarm. This page is a one-time snapshot as of the date below, not a recurring refresh, since cash flow statements only change when a company files a new 10-Q or 10-K.