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Are Warpaint London PLC (LON:W7L) Shareholders Getting A Good Deal?

Warpaint London PLC (LON:W7L) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. What is left after investment, determines the value of the stock since this cash flow technically belongs to investors of the company. I’ve analysed below, the health and outlook of W7L’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.

See our latest analysis for Warpaint London

What is Warpaint London’s cash yield?

Warpaint London’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 Warpaint London to continue to grow, or at least, maintain its current operations.

The two ways to assess whether Warpaint London’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

The business reinvests all its cash profits as well as borrows more money, to maintain and grow the company. This leads to a negative FCF, as well as negative FCF yield, in which case is not a very useful measure.

AIM:W7L Net Worth December 12th 18

Does Warpaint London have a favourable cash flow trend?

Can Warpaint London improve its operating cash production in the future? Let’s take a quick look at the cash flow trend Warpaint London is expected to deliver over time. Over the next few years, W7L is expected to deliver a decline in operating cash flow compared to the most recent level of UK£9.0m, which is not an encouraging sign. However, breaking down growth into a year on year basis, W7L ‘s negative growth rate improves each year, from -19% next year, to 8.2% in the following year.

Next Steps:

Now you know to keep cash flows in mind, You should continue to research Warpaint London to get a better picture of the company by looking at:

  1. Historical Performance: What has W7L’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Warpaint London’s board and the CEO’s back ground.
  3. 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.