7 Small Companies with the Highest Free Cash Flow

Large tech companies grab most of the attention today, but some of the most interesting ratios of market value to cash generated can be found among companies with capitalizations in the single-digit billions of dollars. Seven companies from today's overview report free cash flow that in some cases approaches or even exceeds their total market value. Where do such values come from and when can they be trusted?

Free cash flow is one of the metrics investors track as an indicator of a company's real ability to generate cash. Unlike accounting profit, which can be affected by depreciation, asset revaluations, or one-off items, free cash flow shows how much money the company actually has left after paying operating expenses and asset investments. It is calculated as operating cash flow minus capital expenditures.

Today's selection focuses on smaller companies from the US market, specifically companies with market capitalizations up to about ten billion dollars that have generated the highest absolute free cash flow over the last twelve months. The ratio of cash generated to market value is extreme for some companies.

For insurers, brokers, and lending firms, reported operating cash flow is heavily influenced by the very nature of their business. Their operating cash flow includes premiums and other deposits received, movements in client funds, or loan repayments – items that have no equivalent at an industrial or technology company. High free cash flow here therefore does not mean that the company could pay out that entire amount to shareholders. That is why it is important with each company to understand what really lies behind the number.