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Liability Adjusted Cash Flow Yield (LACFY)

Liability Adjusted Cash Flow Yield (LACFY)

Liability-adjusted cash flow yield (LACFY) is a typical stock valuation formula made and named by TheStreet's John DeFeo:

10-Year Average Free Cash Flow/(((Outstanding Shares + Options + Warrants) x (Per Share Price) + (Liabilities)) - (Current Assets - Inventory))

Basically, this formula is a traditionalist variant (propelled by the works of Benjamin Graham and David Dodd) of the regularly utilized FCF/EV formula. A shorthand rendition of the formula can be utilized for speedier, less conservative valuation evaluations.

5-Year Avg. Free Cash Flow/((Outstanding Shares x Per Share Price) + (Liabilities - Cash))

The formula - - best applied to large companies with generally stable earnings - - gives a yield (%) that can be utilized to judge the engaging quality of a stock when contrasted with a "risk free" investment (like a U.S. government bond). On the off chance that the liability-adjusted cash flow yield is something like 4/3 of the risk free rate, an investor can breathe easy in light of having a margin of safety (but, a small one).