Each method has its pros and cons, which are detailed in the Appendix.įigure 3 compares these three methods for calculating the Industrials sector's trailing FCF yields.įigure 3: Industrials Trailing FCF Yield Methodologies Compared: December 2004 - 3/11/22 The Aggregate methodology provides a straightforward look at the entire S&P 500/sector, regardless of market cap or index weighting, and matches how S&P Global ( SPGI) calculates metrics for the S&P 500.įor additional perspective, we compare the Aggregate method for free cash flow with two other market-weighted methodologies: market-weighted metrics and market-weighted drivers. S&P 500 Industrials FCF & Enterprise Value (New Constructs, LLC) We call this approach the "Aggregate" methodology, and it matches S&P Global's ( SPGI) methodology for these calculations.įigure 2: Industrials FCF & Enterprise Value: December 2004 - 3/11/22 We sum the individual S&P 500/sector constituent values for free cash flow and enterprise value. The March 11, 2022, measurement period uses price data as of that date and incorporates the financial data from 2021 10-Ks, as this is the earliest date for which all the 2021 10-Ks for the S&P 500 constituents were available.įigure 2 compares the trends in FCF and enterprise value for the Industrials sector since 2004. Sources: New Constructs, LLC and company filings. S&P 500 Industrials Trailing FCF Yield (New Constructs, LLC) The Industrials sector FCF rose from -$1.1 billion in 2020 to $120.0 billion in 2021, while enterprise value fell from $4.3 trillion as of 3/31/21 to $4.1 trillion as of 3/11/22.įigure 1: Industrials Trailing FCF Yield: December 2004 - 3/11/22 Sample Sector Analysis : Industrialsįigure 1 shows trailing FCF yield for the Industrials sector rose from 0.0% as of 3/31/21 to 2.9% as of 3/11/22. The Basic Materials, Financials, Industrials, Healthcare, Telecom Services, Utilities, Consumer Cyclicals, Energy, and Consumer Non-cyclicals sectors each saw an increase in trailing FCF yield from 3/31/21 to 3/11/22.īelow, we highlight the Industrials sector. On the flip side, the Real Estate sector, at -4.1%, currently has the lowest trailing FCF yield of all S&P 500 sectors. With a 6.8% FCF yield, investors are getting more FCF for their investment dollar in the Basic Materials sector than any other sector. Nine S&P 500 sectors saw an increase in trailing FCF yield from 3/31/21 to 3/11/22. Before the pandemic, the FCF yield for the S&P 500 was 2.0% on 3/31/20. The trailing FCF yield for the S&P 500 rose from 1.1% on 3/31/21 to 2.2% as of 3/11/22. Cash flows rose faster than stock prices as the index's free cash flow (FCF) yield rose to its highest level since 12/31/18. S&P 500 FCF Yield in Q4 Rose above Pre-Pandemic LevelsĢ021 was a very profitable year for the S&P 500. This report is an abridged version of S&P 500 & Sectors: Free Cash Flow Yield Rises above Pre-Pandemic Levels, one of our quarterly series on fundamental market and sector trends.
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