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Calculate FCF yield and implied P/E from free cash flow and market cap.
A yield above 5% is generally attractive. Above 8% may indicate significant undervaluation or elevated risk. Below 2% is expensive.
FCF yield uses actual cash generated, which is harder to manipulate than earnings. It is considered a more reliable valuation metric.
High capital expenditures reduce FCF. Compare FCF to net income; a large gap often signals aggressive accounting or heavy investment cycles.