Calculate the free cash flow margin, a profitability ratio that measures the percentage of revenue that is converted into free cash flow.

Unlike the net profit margin, which can be distorted by non-cash accounting items (e.g. depreciation, stock-based compensation, deferred taxes) and by working capital timing, the free cash flow margin reflects the cash a company actually generates, after capital expenditures, for every dollar of revenue. A persistently low or declining free cash flow margin relative to the net profit margin can be a quality-of-earnings warning sign.

The formula is as follows:

\[\text{Free Cash Flow Margin} = \text{Free Cash Flow} / \text{Revenue}\]

Free Cash Flow Margin in Python

Install the Finance Toolkit with:

pip install financetoolkit -U

Then call get_free_cash_flow_margin as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(["AAPL", "TSLA"], api_key="FINANCIAL_MODELING_PREP_KEY")

free_cash_flow_margins = toolkit.ratios.get_free_cash_flow_margin()

Parameters

The function accepts the following parameters:

  • rounding (int, optional): The number of decimals to round the results to. Defaults to 4.
  • growth (bool, optional): Whether to calculate the growth of the ratios. Defaults to False.
  • lag (int | str, optional): The lag to use for the growth calculation. Defaults to 1.
  • standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
  • trailing (int): Defines whether to select a trailing period. E.g. when selecting 4 with quarterly data, the TTM is calculated.
Income Quality Ratio Return on Tangible Assets (RoTA) Return on Capital Employed (RoCE) Net Income per EBT Free Cash Flow Operating Cash Flow Ratio Tax Burden Ratio EBT to EBIT EBIT to Revenue Cash Tax Rate Tax Rate Divergence EBITDA Margin Cash Return on Assets (CRoA)
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