"If you can count your money, you don't have a billion dollars." -- J. Paul Getty

Needless to say, Jeff Bezos is rich -- very rich. Estimates vary as to exactly how much he's worth, but he certainly belongs to the $100 billion club, putting him in the company of other famous billionaires like Elon Musk, Bill Gates, Bernard Arnault, and Warren Buffett.

Bezos amassed his fortune as the founder of Amazon (AMZN 3.43%), and he still holds about a 10% stake in the company. On the company's path to becoming the world's largest e-commerce empire, Bezos previously called out a specific number as Amazon's "ultimate financial measure".

Here's what he focused on when leading the company, and how you can use it to grow your own portfolio.

One lit lightbulb surrounded by unlit ones.

Image source: Getty Images.

The "ultimate financial measure": Free cash flow per share

In his 2004 letter to Amazon shareholders, Jeff Bezos said (emphasis mine):

Our ultimate financial measure, and the one we most want to drive over the long term, is free cash flow per share.

Why not focus first and foremost, as many do, on earnings, earnings per share, or earnings growth? The simple answer is that earnings don't directly translate into cash flows, and shares are worth only the present value of their future cash flows, not the present value of their future earnings. Future earnings are a component -- but not the only important component -- of future cash flow per share. Working capital and capital expenditures are also important, as is future share dilution.

Put simply, Bezos argues that free cash flow per share is the key metric that drives shareholder value over the long term.

Graphic formula showing free cash flow as equal to net cash from operations - capex.

This is because free cash flow can increase shareholder value in several ways:

  • Paying dividends
  • Reducing debt
  • Funding a share buyback program
  • Making acquisitions and other investments

What's more, free cash flow is of particular importance to Amazon since the company has a large capital expenditure budget due to its huge network of fulfillment centers and data centers. And yet, Amazon has done an incredible job of growing this metric.

Indeed, when you step back and look at how Amazon grew its free cash flow per share prior to Bezos' departure in 2021, it's clear he followed through on his 2004 goal.

AMZN Free Cash Flow Per Share Chart

Data by YCharts.

More to the point, if you map Amazon's share price onto the chart, it's hard to miss the correlation between free cash flow per share and the stock's returns:

AMZN Chart

Data by YCharts.

How can investors use this metric?

One way to leverage Bezos' favorite metric is to identify stocks that are increasing free cash flow per share. Here are five that stand out:

  1. Netflix
  2. Visa
  3. Nvidia
  4. Meta Platforms
  5. Arista Networks

NVDA Free Cash Flow Per Share Chart

Data by YCharts.

Over the last three years, each of these companies has grown its free cash flow per share between 72% and 276%. What's more, all but one of these companies (Visa) is growing revenue at double-digit rates or better.

To sum up, free cash flow per share is a fantastic but often underappreciated financial metric -- it's time more investors started paying attention to it. While it may not turn you into a billionaire, it could make you a better -- and richer -- investor.