Is Télévision Française 1 SA’s (EPA:TFI) Cash Outlook Optimistic?
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Two important questions to ask before you buy Télévision Française 1 SA (EPA:TFI) 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 industry, TFI is currently valued at €1.7b. I will take you through TFI’s cash flow health and the risk-return concept based on the stock’s cash flow yield, using the most recent financial data. This will help you think about the company from a cash perspective, which is a crucial factor to investing.
See our latest analysis for Télévision Française 1
Is Télévision Française 1 generating enough cash?
Télévision Française 1’s free cash flow (FCF) is the level of cash flow the business generates from its operational activities, after it reinvests in the company as capital expenditure. This type of expense is needed for Télévision Française 1 to continue to grow, or at least, maintain its current operations.
There are two methods I will use to evaluate the quality of Télévision Française 1’s FCF: firstly, I will measure its FCF yield relative to the market index yield; secondly, I will examine whether its operating cash flow will continue to grow into the future, which will give us a sense of sustainability.
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
Although, Télévision Française 1 generate sufficient cash from its operational activities, its FCF yield of 8.5% is roughly in-line with the broader market’s high single-digit yield. This means investors are being compensated at the same level as they would be if they just held the well-diversified market index.
Does Télévision Française 1 have a favourable cash flow trend?
Another important consideration is whether this return is likely to be maintained over the next couple of years. We can gauge this by looking at TFI’s expected operating cash flows. In the next couple of years, the company is expected to grow its cash from operations at a single-digit rate of 8.9%, increasing from its current levels of €363m to €395m in three years’ time. Furthermore, breaking down growth into a year on year basis, TFI is able to increase its growth rate each year, from -0.3% in the upcoming year, to 14% by the end of the third year. The overall future outlook seems buoyant if TFI can maintain its levels of capital expenditure as well.
Next Steps:
Télévision Française 1’s free cash flow yield suggests you are not being compensated over and above the market index, although you are taking on more risk investing in a single stock. In addition to this, its negative operating cash flow growth outlook is unappealing. Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. I suggest you continue to research Télévision Française 1 to get a more holistic view of the company by looking at:
Valuation: What is TFI 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 TFI 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 Télévision Française 1’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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
