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Morningstar Fundamentals 'cash_return'
Steffen Haaf
posted Jul 31, 2018

Hi
I made a simple algorithm that selects the top 25 stocks with highest 'cash_return' from Moningstar Fundamentals which yields quite satisfactory results .

The cash_return ratio is defined as:
'Refers to the ratio of free cash flow to enterprise value. Morningstar calculates the ratio by using the underlying data reported in the company filings or reports: FCF /Enterprise Value.'

BUT, when i calculate FCF/EV I get completely different results.
'Fundamentals.cash_return.latest' is not the same as 'Fundamentals.free_cash_flow.latest' divided by 'Fundamentals.enterprise_value.latest'

Any ideas what is different?

7 responses
Joakim Arvidsson (Cream Mongoose)
Jul 31, 2018

Hi Steffen,

From memory, Fundamentals.free_cash_flow.latest I believe uses only the latest quarter's fcf figure, whereas the Fundamentals.cash_return.latest I believe uses either the last Annual reported fcf, or the last trailing twelve months' (ttm) fcf.

Indigo Monkey
Jul 31, 2018

Adding to what Joakim said cash return includes interest payments on debt plus free cash flow over enterprise value

Blue Seahawk
Jul 31, 2018

And Fundamentals.fcf_yield?

Joakim Arvidsson (Cream Mongoose)
Jul 31, 2018

fcf_yield is slightly different in that it uses Price (I believe most recent close price) in the denominator instead of EV, but I believe it also uses either Annual fcf or ttm fcf, rather than just the latest quarterly fcf figure.

Wouldn't be a bad idea to play around with this in Research and cross check with other sources like Yahoo finance or directly from the company financial statements.

Steffen Haaf
Aug 4, 2018

Hi
Thank you for your replies. I checked it and you are right, Fundamentals.cash_return.latest is trailing twelve months and Fundamentals.free_cash_flow.latest returns the value for the most recent quarter.

Is there a way to get free cash flow values for trailing twelve months?

Airgo Zhang
Aug 8, 2018

Hi,
Has anyone noticed that some fundamental data is wrong(different) when compared with other fundamental data source such as bloomberg.
For example, ticker: PINC. When I tired to get its latest ROIC data: roic = Fundamentals.roic.latest, the return number is -0.003257. But When I check with bloomberg or other data source, PINC never has a negative ROIC for the past 4 years. And PINC is not the only name that has error. Does anyone have the same problem?

Blue Seahawk
Aug 8, 2018

Yes, I would need some compelling evidence to regain trust in fundamentals. An example involving ev to ebitda where the ratio is way off.

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