A measure of equity cash utilization, free cash flow to equity calculates how much cash is available to a company’s shareholders after all expenses, reinvestment, and debt have been paid.
Free cash flow to equity consists of net income, capital expenditures, working capital and debt.
The FCFE metric is often used by analysts when trying to determine the value of a company.
FCFE as a valuation method has gained popularity as an alternative to the Dividend Discount Model (DDM), especially for cases where the company does not pay dividends.