Capital intensity
Capital spending as a share of revenue.
Formula
Capital intensity = Capital expenditures ÷ Revenue
How to read it
Lower means growth costs less; the capital-allocation grade scores 2% best and 20% worst.
How to use it
Explains why two companies with the same margins turn out different amounts of free cash flow.
Limitations
Capital spending moves with the investment cycle; read several years.
Also called: capex intensity, capex to revenue.