Since it's Jan right now, the two most common will be:
■ 3 Quarters
■ 1 Year
Below, we can see CrowdStrike's cash flow over the past 9 months. The time frame is at the top $CRWD
Amateurs focus on Profits.
Professionals focus on Cash Flow.
Cash Flow Statement 101: 🧵
Since it's Jan right now, the two most common will be:
■ 3 Quarters
■ 1 Year
Below, we can see CrowdStrike's cash flow over the past 9 months. The time frame is at the top $CRWD
1️⃣ Operating Activities (Running the business)
2️⃣ Investing Activities (Investing in the business)
3️⃣ Financing Activities (Paying for the business)
There's freedom in how it gets reported, but this is the basic structure
The top line-item is NET INCOME.
You'd think this would represent the money a company puts in the bank at the end of the year.
But that's NOT THE CASE
Including:
■ Depreciation: Value of asset decreasing
■ Amortization: Expensing pre-paid cost
■ Stock-Based Compensation: Paying employees w/ equity
This covers:
■ Accounts Receivable: Sales not yet collected
■ Accounts Payable: Bills not yet paid
■ Inventory: Value of "stuff" not yet sold
The easiest way of thinking about it: this is a company's REAL net income -- on a cash (and not accrual) basis.
The first line item is very important:
CAPITAL EXPENDITURES
■ Cash spent to acquire or maintain property, plant, buildings, or equipment.
■ Cash spent to develop internally-used software
This is the money a company generates from business after paying for capital expenditures.
This is one of the most important financial metrics in my investing framework
FCF tells a very different story than NET INCOME
Consider $CRWD
📉Net LOSSES in the first 9 months of the past two years have been over $300 million
😟That seems pretty bad
1️⃣ ~$590 million in stock-based compensation (SBC).
2️⃣ ~$860 million in deferred revenue.
The latter represents fees $CRWD has already collected for service in the future. It's in the bank.
(Note: SBC *does* dilute shareholders)
💰$415 million in Operating Cash Flow in the 2021 time period
💰$668 million in Operating Cash Flow in the 2022 time period
When we do, $CRWD Free Cash Flow numbers are:
💰$315 million in the first 9 months of 2021
💰$467 million in the first 9 months of 2022
😟While it's true that $CRWD Net Income LOSSES were over $300M
🤑It's also true that $CRWD Free Cash Flow GAINS were nearly $800M
Knowing that is vitally important with stocks tanking and sources of funding drying up. The company can self-fund if it wants!
@BrianFeroldi , @Brian_Stoffel_ , and I run a live course that gives you the tools to understand financial statements with easy-to-understand examples.
Registration is only open for a few more days ➡️ https://t.co/9j51s8E9oV
DM me for a coupon code.
How to analyze a:
— Brian Withers (@StocksWithBrian) December 27, 2022
\u25aa\ufe0fBalance Sheet
\u25aa\ufe0fIncome Statement
\u25aa\ufe0fCash Flow Statement
In less than 5 minutes: pic.twitter.com/JseZux2yFJ
