Bottom-Up Analysis
Bottom-up analysis is done relative to potential and peers.
• Stronger than average free cash flow yields
Strong and sustainable free cash flow yields are indicative of both fundamental strength and tangible value.
• Better than average sales growth
Growing sources of cash flow are worth more than stagnant flows. It is harder to generate FCF when growing.
• Lower than average leverage
With debt generally cheaper than equity, FCF is harder to generate with low leverage. High financial leverage is risky.