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Deep Dive: Free Cash Flow Explained — Why It Matters More Than Earnings

Wall Street fixates on earnings per share. Analysts build models around net income. Headlines scream about earnings beats and misses. But the most sophisticated investors — from Warren Buffett to private equity titans — have long argued that a different number matters more: free cash flow. Free cash flow strips away the accounting abstractions that cloud net income and answers a deceptively simple question: how much actual cash did this business generate after keeping the lights on and the factories running? It is the money available to pay dividends, buy back shares, reduce debt, or fund acquisitions — the real fuel for shareholder returns. In 2025, Apple generated $98.8 billion in free cash flow while reporting $112 billion in net income. Microsoft produced $71.6 billion in FCF against $101.8 billion in earnings. The gaps are enormous, and understanding why they exist is essential to evaluating any stock. This guide breaks down what free cash flow is, how to calculate it, why it diverges from earnings, and how to use it to compare companies across industries — from asset-light payment networks like Visa to capital-hungry tech giants like Alphabet and Amazon.

free cash flowcash flow analysisFCF yield

Deep Dive: How to Value a Stock — P/E, EV/EBITDA, DCF and the Metrics That Actually Matter

Every stock has a price, but not every stock is worth what it costs. The difference between a stock's market price and its intrinsic value is the central question of investing — and answering it requires understanding the metrics that separate cheap stocks from genuinely undervalued ones. In February 2026, the gap between valuation approaches has never been more visible. Apple trades at a P/E ratio of 33.5x while generating $99 billion in annual free cash flow. Microsoft sits at 24.9x earnings despite being the world's third-largest company by market cap. Nvidia commands a 47x multiple as investors price in years of AI-driven growth. Same market, same economy, wildly different valuations — and each one tells a different story about what investors expect. This guide breaks down the five valuation metrics that matter most: P/E ratio, EV/EBITDA, price-to-free-cash-flow, discounted cash flow analysis, and dividend yield. For each metric, we'll explain what it measures, when it works, when it misleads, and how professional investors actually use it. Whether you're evaluating your first stock or stress-testing a portfolio, these are the tools that separate informed investing from speculation.

stock valuationP/E ratioEV/EBITDA