| price-to-cash-flow ratio (P/CF ratio) A stock valuation measure calculated by dividing a firm's cash flow per share into the current stock price. Financial analysts often prefer to value stocks using cash flow rather than earnings because the latter is more easily manipulated. |
Price-to-Cash-Flow Ratio
What Does Price-to-Cash-Flow Ratio Mean?
A measure of the market's expectations of a firm's future financial health. Because this measure deals with cash flow, the effects of depreciation and other noncash factors are removed. As with the price-earnings ratio, this measure provides an indication of relative value. It is calculated as shown here:
Investopedia explains Price-to-Cash-Flow Ratio
Because accounting policies covering depreciation vary across jurisdictions, the price-to-cash-flow ratio helps investors assess foreign companies from the same industry (e.g., the mining industry) with a bit more ease.
Related Terms:
• Cash Flow
• Cash Flow Statement
• Cash and Cash Equivalents—CCE
• Price-Earnings Ratio—P/E Ratio
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