Earnings to FCF in pictures
![FTAS-PER](https://growthrater.com/gr_web_m1/wp-content/uploads/FTAS-PER-220x133.jpg)
Before I start to drill down into how a market ECC can be used to translate company FCF yields (operating) into growth ratings, I thought a few parting shots at the PE merchants was in order. If you’re seriously trying to explain equity valuations on the basis of reported earnings please consider the following 7 charts relating to the broader market (FT Allshare).
FT Allshare PE multiple was progressively de-rated from 2000-2008
![](http://growthrater.com/gr_web_m1/wp-content/uploads/FTAS-PER.jpg)
Despite an acceleration in relative earnings growth (vs GDP) over the same period
![](http://growthrater.com/gr_web_m1/wp-content/uploads/FTAS-%26-GDP-Comparison-at-constant-prices.jpg)
How much of this acceleration was a function of increased financial leverage however?
![](http://growthrater.com/gr_web_m1/wp-content/uploads/Net-debt-as-a-percent-of-EBITA.jpg)
Which saw debt as a % of EV more than double
![](http://growthrater.com/gr_web_m1/wp-content/uploads/Net-debt-as-a-percent-of-EV.jpg)
More of this earnings meanwhile was being absorbed by additional investment
![](http://growthrater.com/gr_web_m1/wp-content/uploads/Cap-Expend-%26-Dpcn-as-percent-of-sales-%28non-fins%29.jpg)
![](http://growthrater.com/gr_web_m1/wp-content/uploads/FCF-Conv-before-W-Cap-%26-tax.jpg)
Which presents a somewhat less rosy picture on current valuations
![](http://growthrater.com/gr_web_m1/wp-content/uploads/Operating-FCF-yields.jpg)