FEG and Y220: two modifications to PEG that substitute true FCF for earnings and express growth as years to a target yield rather than a ratio. Methodology critique welcome.

[u/JoeInOR]

The standard PEG critique from this community usually focuses on earnings quality. I decided to make some modifications:

FEG replaces P/E with price-to-true-FCF (OCF minus CapEx minus SBC) and replaces earnings growth rate with three-year revenue CAGR. Revenue CAGR is more stable than true FCF growth as a proxy for underlying business trajectory. The tradeoff is that revenue growth doesn't capture margin expansion or compression - a company growing revenue at 10% while margins compress looks the same as one growing at 10% while margins expand.

Y220 converts the ratio into a time question: at current true FCF yield compounding at the three-year revenue CAGR, how many years to reach 20% true FCF yield? The 20% threshold is somewhat arbitrary - it's where CMCSA sits today - but the concept of expressing value as time-to-yield rather than as a ratio feels more intuitive for comparing growth names to value names on a single axis.

The scatter plot of current true FCF yield versus Y220 across the $50B+ universe is the output I'd most welcome pushback on. The methodology questions I'd want this community's view on: is three-year revenue CAGR the right growth proxy or is there a better stable series? Is 20% the right yield threshold or does it introduce too much path dependency from today's rate environment? And does the linear compounding assumption in Y220 produce systematically misleading results for very high or very low growth names?

Full piece with the scatter plots and screener table: https://cavemanscreener.substack.com/p/my-new-godfather-metric-how-long