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The Swift FCF Yield: Facebook

Q2 2016

Facebook FCF Yield Q2 2016

Facebook, Inc. (NASDAQ: FB) is easily known by young people as a social media platform. Well, they might not exactly call it a platform, but it's all about snapping selfies, collecting albums, sharing likes and quips. Yes, there is gaming, for example the popular Znyga (NASDAQ: ZNGA) got its early start at Facebook with the likes of Mafia Wars. Then there is the quick and laymen method of creating a business website on Facebook. However, most of all these offerings and attributes are free. Facebook makes the majority of its money the same way as Google/Alphabet or a television network: ads.

"In the second quarter of 2016 , we continued to make progress on our three main revenue growth priorities: (i) continuing to capitalize on the shift to mobile, (ii) growing the number of marketers using our ad products, and (iii) making our ads more relevant and effective through expanded capabilities of tools for marketers." - SEC Form 10-Q, Q2 '16

Having used Facebook's Ads Manager in past trials, I have found it to be superior to Twitter's ad generator, yet of less return than Google Adsense. However, Facebook's statistics and options for target groups is very unique. The only pause as of late is that Twitter now streams live NFL football games. Television on Twitter? Does Facebook have a viewer draw more than the NFL? It seems their most immediate answer is the presidential debates, the first on Monday, September 26th.

Here is a swift look at Facebook's Free Cash Flow (FCF) Yield for Q2 2016:

FCF Yield Chart

That is to say, Facebook's FCF of $4,054m is approximately 1.10% of the stock's market capital; 1.31% of the enterprise value. This stock is not an example of deep value fundamental wise, rather investors join in for momentum and market share dominance. Without a doubt, billions of quarterly revenue based on ad revenue is a real force to deal with.

Free Cash Flow can be tabulated by taking the value of the company's operating cash flow and subtracting from it the value of capital expenses. The yield is then formulated by dividing the result by either the market capital or enterprise value.


Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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