Free cash flow CAGR (5y / 10y)
GrowthThe compound annual growth rate of free cash flow over roughly 5 and 10 years.
Formula
FCF CAGR = (latest FCF ÷ base-year FCF)^(1 ÷ years) − 1, where FCF = operating cash flow − capital expenditures
Why it matters
Free cash flow is the cash left after running and maintaining the business — the money actually available for dividends, buybacks, debt paydown, or acquisitions. Earnings can be shaped by accruals and estimates; cash either arrived or it did not. A company whose FCF compounds alongside revenue is converting growth into money for owners. When revenue grows but FCF does not, growth is consuming all the cash it produces.
What good looks like
FCF growth roughly matching or exceeding revenue growth over 5–10 years is the healthy pattern. Above 10% a year is strong. Persistent divergence — revenue up, FCF flat — deserves investigation into working capital and capex trends.
Caveats
FCF is lumpier than earnings: a single large capex year or a working-capital swing can move it 30% or more. Endpoint sensitivity is therefore worse than for revenue CAGR. Our FCF subtracts all capex, including growth capex, so heavy investors in future capacity look artificially weak on this measure. The CAGR is undefined when the base year's FCF is zero or negative.
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