Why should you value retail on earnings and cable on FCF?

[manuelbean]

Hi guys,

 

I've just read "You can be a stock market genius" by Joel Greenblatt and he says that retail is usually valued on an earnings basis (EPS to be more exact) while cable companies are usually valued on a FCF basis.

 

I understand why the cable companies should be valued on a FCF basis. There is a high initial investment that probably won't be repeated for a very long time so the depreciation charge isn't a true cash cost.

 

But what about retail? Why shouldn't investors look at retail on a FCF basis?

 

*I know that investors should look at both to understand the business yada yada yada, but let's keep it simple.