Capex per Share

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What is Capex per Share?

Capex per Share represents the capital expenditures (Capex) made by the company divided by the number of outstanding shares, showing the investment per share.

How do you interpret Capex per Share?

Capex per Share highlights the level of investment in long-term assets on a per-share basis, indicating the company's focus on growth and operational capacity.

How to Calculate Capex per Share?

Capex per Share is calculated by dividing the total capital expenditures by the total number of outstanding shares.

Capex per Share=Capital Expenditures (Capex)/Number of Outstanding Shares​

where

• Capital Expenditures are the funds used to acquire or maintain physical assets.
• Number of Outstanding Shares is the total number of shares held by shareholders.

Why is Capex per Share important?

Capex per Share is important because it allows investors to understand how much of the company’s capital investment is linked to each share they own. It can indicate whether a company is focusing on growth, maintenance, or expansion through capital investments, which is a critical aspect of long-term business sustainability and growth.

How does Capex per Share benefit investors?

Investors benefit from Capex per Share by gaining insight into a company’s spending on its fixed assets. This metric helps determine if a company is investing heavily in infrastructure or growth, or if it is maintaining a balanced approach between Capex and free cash flow. It is particularly useful in capital-intensive industries where asset maintenance and growth are critical.

Using Capex per Share to Evaluate Stock Performance

Capex per Share can be used to evaluate how much of the company’s expenditures on assets are supported by its earnings and free cash flow. Comparing Capex per Share over time or across competitors helps investors determine if a company is efficiently managing its capital investments.

FAQ about Capex per Share

What is a Good Capex per Share?

A "good" Capex per Share depends on the company’s industry and phase of growth. For example, in capital-intensive industries such as telecommunications or utilities, higher Capex per Share might indicate necessary infrastructure development. However, excessive Capex without a corresponding increase in earnings may raise concerns about capital efficiency.

What Is the Difference Between Metric 1 and Metric 2?

Capex per Share measures the capital expenditures per share, reflecting how much the company is investing in assets. Free Cash Flow per Share (FCFPS) reflects the cash left after operating expenses and Capex have been accounted for, showing how much cash is available for distribution or reinvestment.

Both metrics are related, but Capex per Share focuses on the company’s investments in its assets, while FCFPS focuses on the remaining cash flow after such investments.

Is it bad to have a negative Capex per Share?

A high Capex per Share can be a positive indicator if it is part of a well-executed growth strategy or asset maintenance plan. However, it can be concerning if the company is over-investing without clear returns or if it leads to excessive debt, especially in industries where capital expenditures do not translate into higher revenues.

What Causes Capex per Share to Increase?

Capex per Share may increase due to:

Significant investments in new projects, technology, or infrastructure
Maintenance of aging assets or upgrades
Expansion of the company’s operations
A reduction in the number of outstanding shares (e.g., through share buybacks)

What are the Limitations of Capex per Share?

The limitations of Capex per Share include:

It doesn’t indicate whether the Capex is being used efficiently or if it will generate returns.
It may not be directly comparable across industries, as different sectors have varying capital expenditure needs.
The metric doesn’t account for the overall profitability or return on the capital invested.

When should I not use Capex per Share?

Capex per Share should not be used as the sole indicator of a company’s health. It is less useful when comparing companies in different industries or in businesses where asset-light models dominate, such as software companies, where Capex tends to be minimal.

How does Capex per Share compare across industries?

Capex per Share varies significantly across industries. Capital-intensive sectors like manufacturing, telecommunications, and utilities typically have higher Capex per Share compared to service-based or technology-driven sectors. Therefore, comparing Capex per Share across different industries requires an understanding of industry-specific capital expenditure norms.

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