(Current FCF - Prior FCF) / Prior FCF x 100, where FCF = Operating Cash Flow - Capital Expenditures
FCF growth is the percent change in free cash flow.
What it is
Free cash flow (FCF) is the cash a company generates from its operations after paying for the capital expenditures needed to maintain and grow the business. FCF growth measures how fast that leftover cash is rising or falling over time. Because it is based on actual cash rather than accounting profit, FCF growth shows whether the company is producing more spendable cash each year.
Why it matters
Free cash flow is the cash available to repay debt, pay dividends, buy back shares, or reinvest, so growing FCF gives a company real financial flexibility. FCF growth is often a higher-quality signal than earnings growth because it is harder to manipulate with accounting choices. Watch out for lumpy capital spending: a company can post a big jump in FCF growth simply by cutting investment one year, which can hurt the business later, so check whether FCF is rising because operations improved or because spending was deferred.
How it's calculated
First compute free cash flow as cash from operations minus capital expenditures for each period, then take current FCF minus prior FCF, divide by prior FCF, and multiply by 100.
How Quintarthai uses it
The 10-year Cash-Flow statement in the Financials tab of each company's deep-analysis page shows operating cash flow and capital expenditures so you can see the free-cash-flow trend, and Quinn's deep analysis quantifies FCF and debt/liquidity risk with click-to-source receipts.
Cross-border note. IFRS (used by Canadian filers) and US GAAP can classify items such as interest paid or received differently on the cash-flow statement, so when comparing FCF growth across the border confirm that operating cash flow is defined the same way for both names.
FAQ
Why might free cash flow growth differ from earnings growth?
Earnings include non-cash items like depreciation and accruals and exclude capital spending, while FCF is real cash after capex; the two can diverge sharply when a company is investing heavily or when accounting profit and cash collection are out of sync.
Is rising free cash flow always a good sign?
Not necessarily. If FCF grows mainly because the company slashed capital expenditures, it may be under-investing, which can boost cash today but weaken growth and competitiveness later.
Check your understanding
A company posts a large jump in free cash flow growth this year. Before treating it as a positive sign, what should you check first?
FCF is operating cash flow minus capex, so a company can inflate FCF growth by deferring investment; you must confirm the gain came from better operations rather than under-investing.