Libs Posted April 8, 2015 Share Posted April 8, 2015 I've noticed cash flow from operations has gone up a lot. What about figuring out free cash flow? Does any one use this as a valuation tool? And am I calculating / thinking about this correctly? Here goes. (Cash flow statement on P. 51:) http://www.berkshirehathaway.com/2014ar/2014ar.pdf Cash flow from operations = $32 B in '14. ( Was $20.9 B just 2 years ago) Purchases of property, plant and Equipment = $15 B last year. Depreciation & amortization was $7.3 B. Let's say that Cap Ex was $8 B, and $7B was for growth. ( Shouldn't we factor in, positively, that $$ spent on Burlington are guaranteed a reasonable return by the regulators? How should I think about that in relation to this calculation?) Thus, free cash flow was something around 32-15+7 = $24 billion. (right?) Furthermore, this doesn't account for undistributed earnings from the equities. It may sound odd to add that to FCF, but then again Buffett used a look-through earnings calc in the past. This would push the number to 27-28 B. Market cap is $342 bilion or ~12.4X "free cash flow." Help :P Link to comment Share on other sites More sharing options...
beerbaron Posted April 8, 2015 Share Posted April 8, 2015 Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups. BeerBaron Link to comment Share on other sites More sharing options...
Libs Posted April 9, 2015 Author Share Posted April 9, 2015 Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups. BeerBaron That's a good point, thank you. I should have thought of that first. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted April 9, 2015 Share Posted April 9, 2015 No matter whether it is $15B or $25 B annually, the accumulation of cash on hand is likely to be "huge" 10 to 20 years hence. (Buffett on CNBC). Link to comment Share on other sites More sharing options...
orthopa Posted April 20, 2015 Share Posted April 20, 2015 Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups. BeerBaron At the risk of sounding ignorant why is this exactly? Thanks Link to comment Share on other sites More sharing options...
beerbaron Posted April 21, 2015 Share Posted April 21, 2015 Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups. BeerBaron At the risk of sounding ignorant why is this exactly? Thanks Take Fairfax cash flow statement, in 2014 they reported Net Earnings of 1.66 Billions but if you look at their cash flow statement you see that their Operating Cash Flow statement is -70 Millions. If you look at the constituents of the cash flow you can see 1.74 Billions from investment gains substracted from their Cash Flow. That is because those investments are earnings but since they have not sold them yet it's not a cash in flow. It's also the same when they make an investment, it takes out their cash flow but really has not much to do with their operation. So why are these investments appear in the cash flow part and not the investment part... because investments are part of insurance companies operations. BeerBaron Link to comment Share on other sites More sharing options...
orthopa Posted April 25, 2015 Share Posted April 25, 2015 Not sure how you calculate it but cash flow from operation is almost meaningless for insurance companies. If I were you I would seperate the insurance from the other two groups. BeerBaron At the risk of sounding ignorant why is this exactly? Thanks Take Fairfax cash flow statement, in 2014 they reported Net Earnings of 1.66 Billions but if you look at their cash flow statement you see that their Operating Cash Flow statement is -70 Millions. If you look at the constituents of the cash flow you can see 1.74 Billions from investment gains substracted from their Cash Flow. That is because those investments are earnings but since they have not sold them yet it's not a cash in flow. It's also the same when they make an investment, it takes out their cash flow but really has not much to do with their operation. So why are these investments appear in the cash flow part and not the investment part... because investments are part of insurance companies operations. BeerBaron Great explaination, thanks. Link to comment Share on other sites More sharing options...
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