In time, and with luck, a burst of consumer-led growth might spur more capital spending by cash-rich businesses.
Chancellor Media Corp. (46, AMFM), a leveraged radio property, sells at 20 times projected free cash flow (cash flow minus necessary capital spending), while Clear Channel Communications, lightly leveraged, sells north of 30 times free cash flow.
The ability of DT to revitalize its US subsidiary with a new infusion of cash and capital spending seems remote now that European mobile market teeters on the edge of a decisive downturn.
And there is potential for a stronger recovery if large firms deploy their huge cash piles for capital spending.
Meanwhile, containing capital spending throws off enormous increments to free cash flow.
Instead he uses a multiple of free cash flow (here defined as cash from operations minus capital spending, but adding back proceeds from selling assets such as equipment-which United does regularly).
Corporate balance sheets have never been more liquid, and cash flow rests far above capital spending.
In sharp contrast to the Fed-inspired boomlet on Wall Street, Gallup polling has found that one in five small firms expect to drop their employee count, one in three expect to decrease capital spending and almost as many expect to be in more severe cash flow troubles by the end of the year.
FORBES: Wall Street's Hollow Boom: With Small Business And Startups Lagging, Job Recovery Unlikely
Spending cash on share buy-backs boosts earnings per share immediately, whereas a capital-investment programme may actually reduce earnings in the short term.
ECONOMIST: American profits have been high but the trend may not last
He contends that revenue visibility is improve, with U.S. and China capital spending growing, and Europe likely bottoming in the first half of 2012, and cost cutting driving margin and cash flow improvements, the time is now to get more bullish.
FORBES: Alcatel-Lucent Up; Deutsche Bank Says Cash Fears Overdone
He advises buying when pharma is trading at low multiples of earnings, sales, cash flow (in the sense of earnings before interest, depreciation, taxes and amortization but before capital spending) or all three.
应用推荐