In Praise of Free Cash Flow


Tim Melvin

 | Aug 27, 2014 | 3:00 PM EDT
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I am something of a nerd, so if you don't have healthy interest in books, baseball or stocks, most conversations around Chez Melvin could lead to death by disinterest. Last night, was no exception as I spent several hours chatting about valuation ratios while watching the Orioles add a game to their lead in the AL East. My preferred metric for picking cheap stocks always has been and always will be price-to-book value, but I know that others prefer different methods. As I wrote yesterday, Tobias Carlisle has written a new book where he talks at length about the EV/EBITDA ratio. And I have friends who are very successful value investors who use price to free cash flow.

I haven't run a price-to-free-cash-flow screen in a few weeks and have not written about this approach to value investing in some time. So I launched a search for companies trading in the bottom 10% of all companies ranked by this metric. Some interesting names made the grade and are worth additional research and consideration for long-term investors....504 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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