ANGI Homeservices Inc (NASDAQ:ANGI): Exploring Free Cash Flows
Two important questions to ask before you buy ANGI Homeservices Inc (NASDAQ:ANGI) is, how it makes money and how it spends its cash. What is left after investment, determines the value of the stock since this cash flow technically belongs to investors of the company. Today we will examine ANGI’s ability to generate cash flows, as well as the level of capital expenditure it is expected to incur over the next couple of years, which will result in how much money goes to you. See our latest analysis for ANGI Homeservices
Is ANGI Homeservices generating enough cash?
ANGI Homeservices generates cash through its day-to-day business, which needs to be reinvested into the company in order for it to continue operating. What remains after this expenditure, is known as its free cash flow, or FCF, for short. I will be analysing ANGI Homeservices’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
Along with a positive operating cash flow, ANGI Homeservices also generates a positive free cash flow. However, the yield of 2.55% is not sufficient to compensate for the level of risk investors are taking on. This is because ANGI Homeservices’s yield is well-below the market yield, in addition to serving higher risk compared to the well-diversified market index.
Does ANGI have a favourable cash flow trend?
Can ANGI improve its operating cash production in the future? Let’s take a quick look at the cash flow trend the company is expected to deliver over time. Over the next couple of years, ANGI’s operating cash flows is expected to more than double from the current level of US$41.82M, which is highly optimistic, so long as capital expenditure doesn’t ramp up by even more. Although this seems impressive, breaking down into year-on-year growth rates, ANGI’s operating cash flow growth is expected to decline from a rate of 407.97% in the upcoming year, to 12.03% by the end of the third year.
Next Steps:
The company’s low yield relative to the market index means you are taking on more risk holding the single-stock ANGI Homeservices as opposed to the diversified market portfolio, and being compensated for less. Though the high operating cash flow growth in the future could change this. Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. I recommend you continue to research ANGI Homeservices to get a better picture of the company by looking at:
Valuation: What is ANGI 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 ANGI 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 ANGI Homeservices’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.
