No. of Recommendations: 2

I've done the NGVC analysis. On the return using earnings, it seems straight forward, with operating income of $24,248 and the liabilities plus shareholder equity being $188,985 for a 12.8% return versus the retail grocery cost of capital of 8.2%.
However, on the free cash flow side, hmmmm. Cash from operations is 31,749. Cap Ex per se....? What I have is cash used for investment which is equipment, etc., and is related to the opening of new stores which is 36,512. This is the part that I question. These are not cap ex to maintain status quo, but cap ex to expand the business as part of the long term strategy of growing to over 1,000 stores.
In any case, the FCF is negative. And this doesn't include capital lease obligations... which are either 42,893 or 21,748. I don't think I am looking at the right concept here. From the notes: "Contractual obligations represents the payments due under our ten capital and financing lease obligations, price of which were open as of (end of Q4). We do not record rent expenses for these capital leases but rather rental payments under the capital leases recognized as reduction of the capital and financing lease obligations and interest expenses."
It is fuzzy to me why this would be a number relevant to reducing cash from operations.
Do you have any views on using this kind of cap ex to evaluate/determine FCF?

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