In This Article:
Carbonxt Group Limited (ASX:CG1) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. After investment, what’s left over is what belongs to you, the investor. This also determines how much the stock is worth. I’ve analysed below, the health and outlook of CG1’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio. View our latest analysis for Carbonxt Group
What is Carbonxt Group’s cash yield?
Free cash flow (FCF) is the amount of cash Carbonxt Group has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations. I will be analysing Carbonxt Group’s FCF by looking at its FCF yield and its operating cash flow growth. The yield will tell us whether the stock is generating enough cash to compensate for the risk investors take on by holding a single stock, which I will compare to the market index. The growth will proxy for sustainability levels of this cash generation.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
After accounting for capital expenses required to run the business, Carbonxt Group is not able to generate positive FCF, leading to a negative FCF yield – not very useful for interpretation!
Does CG1 have a favourable cash flow trend?
Does CG1’s future look brighter in terms of its ability to generate higher operating cash flows? This can be estimated by examining the trend of the company’s operating cash flow going forward. Over the next few years, CG1 is expected to deliver a decline in operating cash flow compared to the most recent level of -AU$4.33M, which is not an encouraging sign. Breaking down operating cash growth into a year-on-year basis, it seems like CG1 will face a continued decline in growth rates, from -77.46% next year, to -562.78% in the following year.
Next Steps:
Now you know to keep cash flows in mind, You should continue to research Carbonxt Group to get a more holistic view of the company by looking at:
-
Valuation: What is CG1 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CG1 is currently mispriced by the market.
-
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Carbonxt Group’s board and the CEO’s back ground.
-
Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.