Price to Cash Flow = Market value of the company / Cash from operating activities or Stock Price / Operating Cash Flow per Share.
The Price to Cash Flow (P/CF) ratio is a valuation ratio that shows you the value of a company relative to its operating cash flow. It uses operating cash flow, which adds back non-cash expenses such as depreciation and amortization to net income after tax.
The P/CF multiple works well for companies that have large non-cash expenses such as depreciation. It is especially helpful to value companies that have positive cash flow but are not profitable because of large non-cash expenses. A low P/CF number says that a stock may be undervalued.
Some investors prefer P/CF to Price to Earnings as earnings can be more easily manipulated than cash flows.
Price to Cash Flow differs from the Price to Free Cash Flow where capital expenditure is deducted from cash from operating activities.
All ratios are calculated on a trailing 12 months (TTM) basis.
This means the last twelve months (not the company’s financial year) is compared to the same period in the past. We do this to make sure that the screener data includes the latest, most up to date, financial results of the company.
How to use the ratio
Available as a screening ratio: Yes
Available as an output column ratio: Yes (Look for it in the Valuation tab)
How to select the lowers Price to Cash Flow companies
To find companies with the lowest Price to Cash Flow (undervalued companies) set the slider from 0% to 10%.
To find undervalued companies with the lowest Price to Cash Flow ratio:
- Run a screen
- Select Price to Cash Flow as an output column
- Click on the column heading to sort it from low to high.