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FCF Margin by Industry: Free Cash Flow Benchmarks
Free cash flow margin only means something in context — 8% is healthy for a capital-heavy industrial and thin for a mature software company. This table shows the low, median, and high FCF margin for all 11 GICS sectors, and the box below benchmarks any ticker against its own industry in one click.
How to Use FCF Margin Benchmarks
Free cash flow margin — free cash flow (operating cash flow minus capital expenditures), divided by revenue — measures how much of every sales dollar the business ultimately keeps as cash after paying to maintain and grow its asset base. Because it starts from real cash rather than accounting earnings, it is harder to manipulate than net margin and speaks directly to what matters to owners: the money available for dividends, buybacks, debt paydown, and acquisitions.
The single most common mistake is comparing FCF margins across sectors. Capital-light software and financial businesses structurally convert 20%+ of revenue into free cash because they need little physical investment, while industrials, energy, and consumer discretionary companies run healthily at single digits because plants, inventory, and equipment consume cash. Find the sector row first, then judge whether a company sits above or below its industry median. Being above the median — and holding that margin steady over time — is the signal of a genuinely cash-generative business.
FCF margin is a starting point, not the whole story. A single year can be distorted by a big capital project, a working-capital swing, or a one-off tax item, so always read it across several years. Compute free cash flow for any ticker with the Free Cash Flow Calculator, and see how cash flow assumptions drive intrinsic value in the DCF guide.