Price-to-cash flow ratio

The price/cash flow ratio (also called price-to-cash flow ratio or P/CF), is a financial ratio used to compare a company's market value to its cash flow. It is calculated by dividing the company's market cap by the company's operating cash flow in the most recent fiscal year (or the most recent four fiscal quarters); or, equivalently, divide the per-share stock price by the per-share operating cash flow.

It is commonly used by financial analysts to assess investment value, especially for firms with significant non-cash expenses like depreciation. A lower P/CF suggests a stock may be undervalued, while a higher ratio could indicate overvaluation, though context—such as industry norms or economic conditions—matters in interpretation.

For example, if the stock price for two companies is $25/share and one company has a cash flow of $5/share (25⁄5=5) and the other company has a cash flow of $10/share (25⁄10=2.5), then if all else is equal, the company with the higher cash flow (lower ratio, P/CF=2.5) has the better value.

See also

• Price-to-earnings ratio
• Cash-flow-to-debt ratio
• Financial ratio
• Cash flow