What Is the Price-to-Cash Flow (P/CF) Ratio?

Business & Management
#1

The price-to-cash-flow (P/CF) ratio is a stock valuation metric that compares a firm’s price to its operating cash flow per share. The operational cash flow (OCF) ratio is calculated by subtracting non-cash costs like depreciation and amortization from net income. P/CF is particularly effective for assessing businesses with good cash flow but low profitability due to high non-cash costs.
Companies with high non-cash expenditures, such as depreciation, benefit from the P/CF multiple. A stock with a low P/CF ratio may be undervalued in the market. Some analysts favor price-to-cash-flows (P/CF) over price-to-earnings (P/E) since earnings are easier to manipulate than cash flows.
pcf

#2

  • The price-to-cash flow (P/CF) ratio is a multiple that compares a company’s market value to its operating cash flow or its stock price per share to operating cash flow per share.

  • The P/CF multiple works well for companies that have large non-cash expenses such as depreciation.

  • A low P/CF multiple may imply that a stock is undervalued in the market.

  • Some analysts prefer P/CF over price-to-earnings (P/E) since earnings can be more easily manipulated than cash flows.