Price-to-Cash Flow Ratio

Price-to-Cash Flow Ratio

The ratio of a company's stock price to the quantity of its cash inflows, minus its cash outflows over a given time, usually a year. The price-to-cash flow is similar to a company's price-earnings ratio, but it does not take into account earnings that have not actually been received. Some analysts prefer the price-to-cash flow ratio because it allows them to assess risk relative to the company's cash on-hand, instead of the cash it ought to have.
References in periodicals archive ?
Regarding commonly used multiples, the price-to-earnings ratio and the price-to-cash flow ratio show different patterns between VM and LM trades.
ret (% p.a.) 997 -2.919 (***) 1.825 (***) CAPM beta 1,064 1.179 (***) 1.121 (***) Return SD (% p.a.) 1,064 3.402 (***) 3.258 (***) Return skewness 1,064 0.114 (***) 0.115 (***) Return kurtosis 1,064 3.379 (***) 3.343 (***) Short interest (mil) (+) 620 9.845 (***) 10.098 (***) Price-to-earnings ratio (+) 491 16.721 (***) 17.656 (***) Price-to-cash flow ratio (+) 446 12.137 (***) 12.712 (***) Return on equity (% p.a.) (+) 610 9.898 (***) 11.495 (***) Return on investment (% p.a.) (+) 611 7.348 (***) 8.479 (***) S&P short-term credit rating (+) 107 102.575 (***) 102.552 (***) S&P long-term credit rating (+) 281 10.566 (***) 10.458 (***) Total assets to total equity 512 3.380 (***) 3.260 (***) ratio (+) Retained earnings (Sbil) (+) 392 2.266 (***) 2.402 (***) Panel B.
Once you have filtered the list of candidates, you can further fine tune it by comparing each stock's price-to-book value ratio, price-to-cash flow ratio and price-to-sales ratio against industry and overall market average.
* Price-to-cash flow ratio. A similar ratio that compares a company's stock price to the amount of cash the business generates.
Price-to-cash flow ratio. Using cash flow rather than reported earnings helps eliminate accounting distortions from items such as depreciation and goodwill.
The reference index MSCI USA Prime Value 100% hedged to EUR Index includes companies with a relatively low valuation, taking into account indicators such as the price-to-earnings, price-to-book, price-to-sales as well as price-to-cash flow ratios.