Interesting research on whether free cash flow generation is "real" because of SBC.
The results are not what most would think or may want to hear. SBC doesn't matter to free cash flow. And in fact, unadjusted FCF metrics have generated better alpha than adjusting out SBC.
The results are not what most would think or may want to hear. SBC doesn't matter to free cash flow. And in fact, unadjusted FCF metrics have generated better alpha than adjusting out SBC.
Can see the impact of SBC on large cap FCF margins and FCF yield
Biggest impact of SBC on FCF margins is in the sectors you would expect, biotech, tech and interactive media
Unadjusted FCF metrics have generated more alpha
FCF unadjusted for SBC has even outperformed within tech
"Conclusion: It just doesn't matter"
*taps mic*
This is quantitative research. It shows that over 5, 10 and 17 years using FCF unadjusted for SBC outperforms deducting SBC from FCF. It's not a moral argument in favor of SBC. It's just showing the analysis of a particular question.
This is quantitative research. It shows that over 5, 10 and 17 years using FCF unadjusted for SBC outperforms deducting SBC from FCF. It's not a moral argument in favor of SBC. It's just showing the analysis of a particular question.
FCF margin is an important factor. People have questioned whether the margins are real because many of the highest margin co's have large SBC expenses. This sought to answer whether that was important to account for.
