Definition
FCF margin shows what percentage of revenue converts to free cash flow. It's often more meaningful than net margin because it reflects actual cash generation after necessary reinvestment. High FCF margin indicates strong cash conversion.
Formula
FCF Margin = Free Cash Flow / Revenue × 100%
Example
A company with $100M revenue and $18M free cash flow has 18% FCF margin. Strong software businesses often achieve 25-30% FCF margins.
FAQ
What is Free Cash Flow Margin?
Free cash flow as a percentage of revenue.
How do you calculate Free Cash Flow Margin?
A common formula for Free Cash Flow Margin is: FCF Margin = Free Cash Flow / Revenue × 100%
Why is Free Cash Flow Margin important?
Free Cash Flow Margin helps investors evaluate profitability and make more informed decisions.