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Errors with Morningstar FCF Numbers

July 30th, 2009

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A reader informed me that the Morningstar FCF number was incorrect and it seems like Morningstar made some changes to the numbers. FYI everything was good yesterday so no need to worry about over inflated FCF numbers.

Where the formula for Free Cash Flow is

FCF = Cash from operations – capex

it seems like the current numbers from Morningstar is calculating FCF as

FCF = Cash from operations + capex

Previously, the capital expenditure numbers were negative but now the numbers are positive.

I’ve emailed Morningstar letting them know of the error but until they change it, a quick fix would be to change the FCF formula in excel to the following

FCF = Net Income + Depreciation & Amortization – Capex

=C60+C61-C80 (current formula is =C60+C61+C80 but we need to subtract now.)

Just a great example of why you shouldn’t blindly follow the spreadsheet :)

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