Yingli Green Energy Holding Company Limited (NYSE:YGE) 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. After investment, what’s left over is what belongs to you, the investor. This also determines how much the stock is worth. I will take you through YGE’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. View our latest analysis for Yingli Green Energy Holding
Is Yingli Green Energy Holding generating enough cash?
Yingli Green Energy Holding’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 Yingli Green Energy Holding to continue to grow, or at least, maintain its current operations. There are two methods I will use to evaluate the quality of Yingli Green Energy Holding’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
Despite its positive operating cash flow, after accounting for capital expenses required to run the business, Yingli Green Energy Holding is not able to generate positive FCF, leading to a negative FCF yield – not very useful for interpretation!
What’s the cash flow outlook for YGE?
YGE’s FCF may be negative today, but is operating cash flows expected to improve in the future? Let’s examine the cash flow trend the company is anticipated to produce over time. In the next few years, YGE is expected to deliver a decline in operating cash flow compared to the most recent level of CN¥-415.4M, which is not an encouraging sign.
What this means for you:
Interested in learning more about Yingli Green Energy Holding’s fundamentals? To quickly understand whether it is a good investment for you, scroll through our FREE easy-to-understand infographics report. Not interested in Yingli Green Energy Holding anymore? How about checking out hidden opportunities in high-growth and undervalued 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.