Cash flow is an extremely important metric for investors and analysts to follow. Cash flow can be broken into three main categories:
- Operating cash flow which measures the amount of money a company has left over after meeting its day-to-day expenses such as wages and raw materials.
- Cash flows from investing activities which measure how much a company spends to acquire new assets such as property, plant, and equipment.
- cash flows from financing activities which measure how much money a company raises through issuing new shares or debt or repaying existing shareholders or lenders.
Cash flow directly impacts the financial strength of a company by giving analysts insight on whether the firm will have enough cash in the future to meet obligations like debt payments and maintenance capital expenditures.
Read on to discover more about companies with high free cash flow.
1. Dropbox
Headquarters: San Francisco, California Industry: Information Technology What investors like most about this company is its extremely high free cash flow. Dropbox has grown into a cloud storage behemoth and is expected to generate $1 billion in revenue in 2019.
Dropbox is competing with some of the largest companies in the world, including Amazon and Microsoft, but its high free cash flow ($159 million in 2018) and strong balance sheet (cash and short-term investments totaling $2.2 billion) give the company an upper hand. Dropbox investors can expect to see the company make strategic acquisitions to expand its product and geographic reach. What could hold Dropbox back is the fact that the company is unprofitable and its operating cash flow has decreased in recent years.
2. Facebook
Headquarters: Menlo Park, California Industry: Information Technology Investors in Facebook can thank the company’s strong revenue growth for its high free cash flow. Facebook has grown into one of the largest internet companies in the world, with more than 2 billion monthly users. In 2019, the company is expected to generate $46 billion in revenue, up from $41 billion in 2018.
Facebook’s strong revenue growth has, in turn, propelled its free cash flow. In 2018, Facebook’s free cash flow was $19.5 billion, and the company ended the year with $42.7 billion in cash and short-term investments. Facebook investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Facebook back is the fact that the company has had to deal with privacy issues and government regulation in the past.
3. Google
Headquarters: Mountain View, California Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Google’s core business is internet search, and the company has successfully expanded into a wide array of products, including email, cloud storage, and data analytics. Google’s revenue has steadily increased over the past decade, from $7.5 billion in 2008 to $136 billion in 2018.
Google’s strong revenue growth has also propelled its free cash flow. In 2018, Google’s cash flow was $52.4 billion, and the company ended the year with $100 billion in cash and short-term investments. Google investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Google back is the fact that the company has had to deal with antitrust investigations and government regulation in the past.
4. Microsoft Corporation
Headquarters: Redmond, Washington Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Microsoft’s core business is computer software, and the company has successfully expanded into a wide array of products, including email, cloud storage, and data analytics. Microsoft’s revenue has steadily increased over the past decade, from $33 billion in 2008 to $100 billion in 2018.
Microsoft’s strong revenue growth has also propelled its free cash flow. In 2018, Microsoft’s cash flow was $16.2 billion, and the company ended the year with $116 billion in cash and short-term investments. Microsoft investors can expect to see the company continue to make acquisitions and expand its product and geographic reach. What could hold Microsoft back is the fact that the company has had to deal with antitrust investigations and government regulation in the past.
5. Netflix
Headquarters: Los Gatos, California Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Netflix has grown into one of the largest streaming television and movie companies in the world. In 2019, the company is expected to generate $15 billion in revenue, an increase from $11 billion in 2018.
Netflix’s strong revenue growth has, in turn, propelled its free cash flow. In 2018, Netflix’s cash flow was $3.8 billion, and the company ended the year with $2.2 billion in cash and short-term investments. Netflix investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Netflix back is the fact that the company is unprofitable and its operating cash flow has decreased in recent years.
6. PayPal Holdings Inc.
Headquarters: San Jose, California Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. PayPal is a global online payment company that has become a go-to payment method for internet shoppers. In 2019, the company is expected to generate $26 billion in revenue, an increase from $23 billion in 2018.
PayPal’s strong revenue growth has also propelled its free cash flow. In 2018, PayPal’s cash flow was $10 billion, and the company ended the year with $19 billion in cash and short-term investments. PayPal investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold PayPal back is the fact that the company is unprofitable.
7. Pandora Media Inc.
Headquarters: Oakland, California Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Pandora is a global internet radio company that has become a go-to source for music and podcasts. In 2019, the company is expected to generate $2.9 billion in revenue, an increase from $2.5 billion in 2018.
Pandora’s strong revenue growth has also propelled its free cash flow. In 2018, Pandora’s cash flow was $226 million, and the company ended the year with $349 million in cash and short-term investments. Pandora investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Pandora back is the fact that the company is unprofitable.
8. Sirius XM Holdings Inc.
Headquarters: New York, New York Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Sirius XM is a global satellite radio company that provides a wide array of channels and programming to its listeners. In 2019, the company is expected to generate $5 billion in revenue, an increase from $4 billion in 2018.
Sirius XM’s strong revenue growth has also propelled its free cash flow. In 2018, Sirius XM’s cash flow was $1.9 billion, and the company ended the year with $3 billion in cash and short-term investments. Sirius XM investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Sirius XM back is the fact that the company is unprofitable.
9. Snap Inc.
Headquarters: Venice, California Industry: Information Technology What investors like most about this company is its strong revenue growth and high free cash flow. Snap is a global social media company that has become a go-to source for short-form video and image content. In 2019, the company is expected to generate $2.2 billion in revenue, an increase from $1.9 billion in 2018.
Snap’s strong revenue growth has also propelled its free cash flow. In 2018, Snap’s cash flow was $1 billion, and the company ended the year with $3.5 billion in cash and short-term investments. Snap investors can expect to see the company continue to make strategic acquisitions to expand its product and geographic reach. What could hold Snap back is the fact that the company is unprofitable.