Capex vs Opex: What Investors Need to Know
Capex vs opex explained: how capital expenditures differ from operating expenses, and why capex intensity matters for free cash flow and valuation.
Capex vs opex (quick definitions)
Opex keeps the business running day-to-day. Capex is spending on long-lived assets (equipment, buildings, software capitalization). Capex reduces free cash flow.
Why investors care
- Capital-intensive businesses may have lower free cash flow
- Depreciation can lag real capex needs
- DCF valuation depends on sustainable free cash flow
Link capex to intrinsic value
Use cash flow and DCF concepts to understand reinvestment needs.
FAQs
Is capex always bad?▼
No. Growth capex can create value. The key is whether returns on invested capital are attractive.
Why do some businesses have high capex?▼
Utilities, telecom, industrials, and energy often require ongoing asset investment to operate.
Related
Intrinsic Investor is for education and research only. Not financial advice.