Investors who follow data-software company Snowflake (NYSE: SNOW) are likely well aware of two facts. First, the stock has a pricey valuation. Second, it's a high-quality business that likely warrants some degree of pricey valuation.

I recognize that calling a company like Snowflake high-quality is somewhat subjective. However, I believe an objective strength of the company is its ability to generate free cash flow. 

In its 2023 fiscal year (which ended in January), Snowflake converted 24% of its revenue into free cash flow -- few companies have a better margin. This could be one of the factors supporting the stock's valuation right now. And this is why I believe it's important for investors to understand why its free cash flow could drop in its fiscal 2024.

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Source Fool.com