In This Article:
Two important questions to ask before you buy TAKKT AG (ETR:TTK) is, how it makes money and how it spends its cash. This difference directly flows down to how much the stock is worth. Operating in the internet and direct marketing retail industry, TTK is currently valued at €898.9m. I’ve analysed below, the health and outlook of TTK’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.
Check out our latest analysis for TAKKT
What is TAKKT’s cash yield?
Free cash flow (FCF) is the amount of cash TAKKT 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.
The two ways to assess whether TAKKT’s FCF is sufficient, is to compare the FCF yield to the market index yield, as well as determine whether the top-line operating cash flows will continue to grow.
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
TAKKT’s yield of 3.62% indicates its sub-standard capacity to generate cash, compared to the stock market index as a whole, accounting for the size differential. This means investors are taking on more concentrated risk on TAKKT but are not being adequately rewarded for doing so.
What’s the cash flow outlook for TAKKT?
Does TTK’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 moving forward. Over the next few years, the company is expected to grow its cash from operations at a double-digit rate of 40.0%, ramping up from its current levels of €80.3m to €112.4m in two years’ time. Although this seems impressive, breaking down into year-on-year growth rates, TTK’s operating cash flow growth is expected to decline from a rate of 30.4% next year, to 7.3% in the following year. But the overall future outlook seems buoyant if TTK can maintain its levels of capital expenditure as well.
Next Steps:
Although its positive operating cash flow, and high future growth, is appealing, the low free cash flow yield is unattractive. This is because you would be better compensated in terms of cash yield, by investing in the market index, as well as take on lower diversification risk. However, cash is only one aspect of investing. Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. You should continue to research TAKKT to get a better picture of the company by looking at: