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The Georgia Tech Financial Analysis Lab conducts unbiased research on issues of financial reporting and analysis. Unbiased information is vital to effective investment decision-making. Accordingly, we think that independent research organizations, such as our own, have an important role to play in providing information to market participants.

Because our lab is housed within a university, all of our research reports have an educational quality, as they are designed to impart knowledge and understanding to those who read them. Our focus is on issues that we believe will be of interest to a large segment of stock market participants. Depending on the issue, we may focus our attention on individual companies, groups of companies, or on large segments of the market at large.

A recurring theme in our work is the identification of reporting practices that give investors a misleading signal, whether positive or negative, of corporate earning power. We define earning power as the ability to generate a sustainable stream of earnings that is backed by cash flow. Accordingly, our research may look into reporting practices that affect either earnings or cash flow, or both. At times our research may look at stock prices generally, though from a fundamental and not technical point of view.


Quarter 1, 2014
Free Cash Margin Index:
Recession Lows

2.43%, 3.96% (Mar. 2001, Dec. 2008)


4.38% (March 2014)

Recent High

7.18% (Mar. 2010)

July 2014

Free cash margin remains within a narrow range around 4.5%. For the twelve months ended March 2014, the
metric decreased to 4.38% from 4.56% in the period ended December 2013 and 4.52% for March 2013. The data
continue to show a weak and sputtering recovery. Median revenues declined slightly to $725.47 million for the
twelve months ended March 2014, from $726.07 million for the period ended December 2013 and $747.23
million for March 2013. Median revenues have now declined 8% from a post-recession high of $788.50 million
in December 2012. Operating profitability, as measured with operating cushion, also declined. The metric fell to
13.92% for the twelve months ended March 2014, down from 13.97% and 14.00%, respectively, for the periods
ending December 2013 and March 2013. With the decline in median revenues and operating profitability,
corporate managers began to restrict their spending, much as they did during the recession. For example,
inventories were reduced, declining to 22.27 revenue days at March 2014, down from 23.10 days at December
2013 and 23.83 days at March 2013. A bright spot, however, was a slight improvement in capital spending.
Capital expenditures as a percent of revenue increased to 3.52% for the twelve months ended March 2014 from
3.49% in December 2013. This is the first observed period of increasing capital spending since December 2012
when the metric stood at 3.66%.

Looking at individual industries, during the March 2014 reporting period, free cash margin was stable in sixteen
industries, increased in ten and declined in eighteen. Compared to Q4 2013, we are seeing more individual
industries with deteriorating free cash margin. Included in this report is a closer look at two separate industries:
Non-metallic and Industrial Metal Mining with increasing free cash margin and Consumer Goods with a sharp
decrease in free cash margin.

Data for this research were provided by Cash Flow Analytics, LLC.,
Charles Mulford is a principal in Cash Flow Analytics, LLC.

Download this Report

View Past Reports


Earnings Quality: Reports on Individual Companies

In these reports we examine one or more dimensions of earnings quality: the cash flow support of earnings, the sustainability of earnings, or the quality of the balance sheet.

DownloadLennar: 02.29.12

DownloadDR Horton: 02.29.12

DownloadDeckers: 04.03.12

DownloadSelected Companies: 05.01.12

DownloadIndustry Review: 01.08.13

DownloadGreat Lakes Dredge: 04.07.13


Excel Spreadsheets of Cash Flow Data and Graphs by Industry

Quarter 1, 2014

0. All Industries (non-financials)
1. Agriculture
2. Food Products
3. Candy & Soda
4. Beer & Liquor
5. Tobacco Products
6. Recreation
7. Entertainment
8. Printing & Publishing
9. Consumer Goods
10. Apparel
11. Healthcare
12. Medical Equipment
13. Pharmaceutical Products
14. Chemicals
15. Rubber & Plastic Products
16. Textiles
17. Construction Materials
18. Construction
19. Steel Works
20. Fabricated Products
21. Machinery
22. Electrical Equipment

23. Automobiles & Trucks
24. Aircraft
25. Shipbuilding & Railroad Equipment
26. Defense
27. Precious Metals
28. Non-metallic & Industrial Metal Mining
29. Coal
30. Petroleum & Natural Gas
31. Utilities
32. Communication
33. Personal Services
34. Business Services
35. Computer Hardware
36. Computer Software
37. Electronic Equipment
38. Measuring & Control Equipment
39. Business Supplies
40. Shipping Containers
41. Transportation
42. Wholesale
43. Retail
44. Restaurants