← Business Metric: Financial (all topics)
Capex intensity & maintenance capex
What it is
Capital expenditure as a percentage of revenue, and the split between spending that maintains existing capacity and spending that adds new capacity
Maintenance capex is the true economic cost of staying in business, and rarely equals reported depreciation
Impact on industries
- Separating maintenance from growth capex reveals how much cash the business could generate if it stopped expanding
- Companies rarely disclose the split, so analysts must estimate it - and the estimate drives the free cash flow figure
- Where maintenance capex persistently exceeds depreciation, reported profit overstates economic earnings
- Intensity varies enormously by industry, so it is a within-sector comparison rather than a cross-sector one