After reviewing today's earnings release I was wondering if anyone has any idea of what kind of cash flow generation MYE had in Q1. The sales and earnings were not much of a surprise. I didn't think they would have a bang up quarter earnings wise. I have been long MYE for many years now and I approve of their levering of the company to pursue acquisitions as long as they have ample cash flow to tend to the debt. My feelings are that in a couple years from now as the debt is paid off MYE will be quite a cash generating machine.
Here is a quick and dirty example of how to calculate free cash flow...
Start with Operating Earnings or Earnings Before Interest & Taxes (EBIT) Tax effect it... meaning use the corporate tax rate to calculate the taxes. Subtract taxes from EBIT. Now you have Net operating profit after tax (NOPAT)
Add back depreciation & ammortization from the statement of cash flows. Subtract Capital Expenditures Subtract changes in working capital.
You now have debt free cash flow.
I asked if anyone knew MYE's free cash flow, because some companies report it.
Just as an FYI, calculating Free Cash Flow is the first step in the process of valuing a company by the Discounted Cash Flow Model. I follow FCF very closely because it is a far more important measure of a company's performance than earnings. First rule of finance is CASH IS KING. Earnings are an accounting construct; they have very little to do with cash generation. This is even more important that the second rule which states.. BUY LOW SELL HIGH!!! :-)