Cash Flows Are The Music of Finance
When Forward View analyzes any company or stock, we always look for the cash flow. "Show me the money" is an appropriate slogan for our research methodology. We believe that a focus on cash flow is both theoretically valid and eminently practical. Over the long-run, a business thrives or fails due to its increases or decreases in cash. The Forward View valuation model utilizes a DCF (discounted cash flow) approach in order to strip out "earnings" based on creative accounting. That's why we never recommend investing in firms without positive cash flows or a clear path to free cash flow (defined as operating cash flow minus capital expenditures).
Too often, equity research analysts forget that the only thing a company can spend is cash. Period. They can't spend "income" from the favorable revaluation of assets nor from adjustments in intangibles. Unfortunately, some analysts base ratings on these very items. Forward View will never get distracted by these things. Our goal is to accurately forecast future cash flows and then value them accordingly. We would be happy to explain the technicalities of our analytical methodology if you would appreciate more information. Forward View always welcomes your inquiries.