When investors think of value-oriented equity strategies, they may anticipate sacrificing growth in exchange for companies exhibiting lower valuations. However, the VictoryShares Free Cash Flow ETF (VFLO B+) challenges this narrative. Rather than succumb to this traditional value-over-growth trade-off, VFLO tracks an index with a disciplined free cash flow (FCF) filter that screens for companies that not only trade at valuations below the value benchmark but also have attractive growth prospects.
VFLO tracks the Victory U.S. Large Cap Free Cash Flow Index (the Index) which has a methodology centered on FCF, the remaining cash a company has after covering all expenses. This remaining capital grants companies the ability to reinvest in the business, pay dividends, pay down debt or perform other activities that can build shareholder value. Ultimately, this metric gives investors one fundamental lens on value, which the Index then pairs with a growth screen.Key Takeaways
VFLO challenges the traditional trade-off between value and growth by combining attractively valued companies with favorable relative growth prospects.
By targeting companies with high expected FCF yield, the Index’s methodology seeks to screen out classic value traps, while its enterprise-value denominator disfavors heavily indebted firms.
Over the three years ended August 31, 2026, the Index’s earnings-per-share growth rate was nearly double that of the Russell 1000® Value Index, at a lower forward price-to-earnings (P/E) multiple.
See More: Cash Flow King: How Victory Capital Built a Multi-Billion-Dollar ETF SuiteWhere VFLO’s Earnings Growth Comes FromThe Victory U.S. Large Cap Free Cash Flow Index differs from traditional value-oriented approaches by using expected FCF: the average of a company’s trailing and forward 12-month free cash flow. That combination screens for companies with a demonstrated record of strong cash generation while accounting for whether they are estimated to sustain it going forward.After the Index identifies its selection of stocks according to the highest FCF yields, a growth filter ranks those names on sales trend, earnings before interest, taxes, depreciation and amortization (EBITDA) trend and long-term earnings-per-share (EPS) growth estimates, keeping the 50 with the highest composite growth score. The result is a focused, 50-stock portfolio that excludes companies whose low valuations may reflect deteriorating fundamentals.
Over a three-year historical period (as of August 31, 2026), VFLO’s holdings had a 12.15% EPS growth rate. That is nearly double the 6.63% EPS growth of the Russell 1000® Value Index, the fund’s style benchmark.How the Cash Flow Screen Shapes ValuationThe Victory U.S. Large Cap Free Cash Flow Index’s differentiation from the Russell 1000 Value Index stems from a fundamental focus on real operational liquidity rather than paper profits or a pure market-cap weighted approach. By screening for high expected FCF relative to enterprise value (EV), the Index targets businesses where strong reported earnings directly translate into available cash. This focus is intended to direct capital toward financially efficient, cash-generative companies.
The Index pairs that earnings-growth profile with a lower valuation than its style benchmark. With a forward P/E of 13.62 compared to 18.36 for the Russell 1000 Value as of August 31, 2026, VFLO provided exposure to companies with faster historical earnings growth at a lower multiple than the value benchmark itself.
Over the three years ended August 31, 2026, VFLO’s holdings combined faster earnings growth than the Russell 1000 Value Index with a lower forward P/E, the outcome its methodology is designed to pursue. The ETF packages cash flow efficiency and historical earnings growth in a single, liquid wrapper.
For more news, information, and analysis, visit the Free Cash Flow Content HubDisclosuresCarefully consider a fund’s investment objectives, risks, charges, and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit //www.vcm.com/prospectus. Read it carefully before investing.
All investing involves risk, including the potential loss of principal. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. ETFs may trade at a premium or discount to their net asset value. The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, or changes in interest or currency rates. Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions. The Fund could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Index Funds invest in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Large shareholders, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of large shareholders, including large inflows or outflows of cash, may adversely affect other shareholders, including potentially increasing capital gains.
Investments concentrated in an industry or group of industries may face more risks and exhibit higher volatility than investments that are more broadly diversified over industries or sectors. Investments in companies in the energy sector may be subject to substantial government regulation, as well as risks involving changes in energy prices, international political instability, and liability for environmental damage and accidents resulting in loss of life or property. The profitability of companies in the "healthcare sector* may be affected by government regulations and healthcare programs, fluctuations in the cost of, and demand for, medical products and services and product liability claims. Derivatives may not work as intended and may result in losses. The Fund may frequently change its holdings, resulting in higher fees, lower returns, and more capital gains. The value of your investment is also subject to geopolitical risks such as wars, terrorism, trade disputes, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies.
The Victory U.S. Large Cap Free Cash Flow Index aims to select high-quality companies from its starting universe by applying profitability screens. It then selects companies with the strongest free cash flow yield that exhibit higher growth. The Index is rebalanced and reconstituted quarterly. This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month FCF and next 12-month forward free cash flow. Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization.
Average P/E Ratio (estimated or next 12 months “NTM”) is the current price of a stock divided by the estimated one-year projection of its earnings per share.
Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization. "Standard deviation* is a common measure of risk that indicates the historical volatility of a portfolio. Beta measures the price volatility, or the level of risk, of a stock relative to the broader market. A beta of 1 indicates that the security’s price has moved with the market. A beta of less than 1 means that the security has been less volatile than the market. A beta of greater than 1 indicates that the security’s price has been more volatile than the market. Average P/E Ratio (estimated or next 12 months “NTM”) is the current price of a stock divided by the estimated one-year projection of its earnings per share. Free cash flow yield is the ratio of a company’s free cash flow per share to its current EV. Forward P/E indicates how much investors are paying today for every dollar of earnings expected over the next year. A higher number means the market is pricing in strong future growth; a lower number suggests modest growth expectations, or a potentially cheap stock.
The Russell 1000® Value Index is a market-capitalization-weighted index that measures the performance of Russell 1000® Index companies with lower price-to-book ratios and lower forecasted growth rates.
VictoryShares ETFs distributed by Victory Capital Services, Inc. (VCS). VCS is not affiliated with VettaFi.
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VettaFi LLC (“VettaFi”) is the index provider for VFLO for which it receives an index licensing fee. However, VFLO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VFLO.
