Free Cash Flow: Seeing Through the Accounting Fog Machine to Find Great Stocks

Really enjoyed George's book! I like how the author focused the concepts all around free cash flow. Also, he highlighted Management compensation, focusing on free cash flow which was something that got me thinking. Most of it was straight to the point and easy to understand. While reading I had some difficulties understanding some points and decided to contact George. He was fast in responding clearing my confusion promptly. Highly recommend this book! - A.

This book is, in essence, a superb explanation of why investors should, when analyzing company accounts, look very closely at 'free cash flow' rather than simply accepting 'earnings per share' as their predominant guide. But the author also explains, at length, exactly what his definition of 'free cash flow' is, and how it is derived. Readers can elect to either just work through the basic principles, or use the book, along with its accompanying spreadsheets to carry out in depth analysis. The best book of its type that I have read.

Great reference book. Good insight, use it often. Takes time to read but totally worth it. Recommended for professionasl in the finance industry.

This book is worthwhile reading for any businessperson.

Good book, very insightful. If your not a math person don't worry, everything is pretty simple, and broken down in a way so that everyone can understand.

A must read for those would like to be retail investors

The author's definition of operating cash flow (from which he derives a profit margin that is important in his selection process) has a major flaw. In excluding all working capital changes from operating cash flow, his model misevaluates companies that are forced to make large accruals for deferred revenue. Any company that recognizes revenue ratably (over the term of a contract) falls in this category. Changes in deferred revenue accruals flow back into cash flow in the working capital line. This is one of the most important adjustments one must make to understand the earnings of companies with ratable revenue recognition.The simplistic analysis of capital expenditures also causes many problems that lead one to cast out too many good stocks. Take for example WMS, a maker of slot machines. By the author's method, free cash flow is down 24% year over year. Why is the stock up about 40% over that span? A large chunk of WMS's capex is the cost of machines that are leased by casinos rather than purchased. WMS gets more than $60 a day in revenue from each machine, on average.How does one evaluate the ROI? A machine might cost WMS $5,000-$8,000 to make. A casino needs to keep the machine on its floor little more than three months for WMS to get paid back for its investment. And when the casino returns the game to WMS, the company can refurbish it cheaply and re-lease it, or sell it outright.WMS has grown gross cash flow (the author's version of operating cash flow) for four straight years, 26% CAGR, 250% increase. Over that span the stock little more than doubled. Perhaps it's still inexpensive now, or maybe it was overvalued four years ago.WMS will never be inexpensive on free cash flow until the company ceases growing leased machine placements, which of course would be a bad thing. In such a case the author's method works in reverse, missing the growth story and finding a high ROI company only when its best days are behind it.

The author presents an interesting theory to consider when investing in stocks. I read this and invested in a couple stocks using his theory. Although his formula flagged the companies as good investment possibilities, neither stock paid off after over a year. His theory places heavy emphasis on cash flow and places earnings per share low on the totem pole for ways to evaluate stocks. He makes some valid points for this reasoning, however, as is the case for many books on investing, the investor should not use this theory as the sole basis for investing. Combining the author's theory can assist in evaluating stocks but my experience says this should only be combined with other fundamental reasoning.I wouldn't recommend this book as the answer all for investing but to be read as food for thought.

Given the author's experience, I was shocked at how basic and elementary this book is. Beyond that, I think that some of his ideas and opinions are fundamentally flawed. The teaching on analysing management compensation is helpful.

A good book if you know knowing about cash flow analysis, but very basic if you have a decent background in investing. Nothing new in here and certainly not worth the price. A very quick read.

The book provides many insights into the uses and computation of free cash flow. Also the author provides helpful examples to understand the mechanics of free cash flow.

Easy reading and straight to the point. The reader should have some familiarity with accounting and financial terms.The spreadsheet is great! The book will help you to better understand the financial evolution of the Companies.

Great