What is price-to-cash flow ratio (P/CF)?
The price-to-cash flow ratio (P/CF) is a ratio used to compare a company’s market value to its cash flow. It is calculated by dividing the common share’s current price by the calculated cash flow per share.
Price-to-cash flow ratio = Current common share price divided by the Cash Flow Per Share (CFPS), where CFPS = (Net Income + Depreciation + Amortization).
In theory, a lower stock’s price to cash flow ratio indicates that the share price holds greater value than reflected by the market.
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