Liability-adjusted cash flow yield (LACFY)
is a common-stock valuation formula created and named by TheStreet's
10-Year Average Free Cash Flow / (((Outstanding Shares + Options + Warrants) x (Per Share Price) + (Liabilities)) - (Current Assets - Inventory))
In essence, this formula is an ultra-conservative version (inspired by the writings of Benjamin Graham and David Dodd) of the commonly used FCF/EV formula. A shorthand version of the formula can be used for quicker, less conservative valuation assessments.
5-Year Avg. Free Cash Flow / ((Outstanding Shares x Per Share Price) + (Liabilities - Cash))
The formula -- best applied to large companies with relatively stable earnings -- provides a yield (%) that can be used to judge the attractiveness of a stock as compared to a "risk free" investment (like a U.S. government bond). If the liability-adjusted cash flow yield is at least 4/3 of the risk free rate, an investor can take comfort in having a margin of safety (albeit, a small one).