Price to Cash Flow Ratio Calculator
Calculate P/CF ratio to evaluate stock valuation and identify undervalued opportunities
Calculate P/CF Ratio
Cash generated from core business operations
Current market price per share
Total number of shares outstanding
From cash flow statement - operating activities section
P/CF Ratio Results
Cash Flow per Share
$2.00
Valuation Assessment
High P/CF ratio suggests premium valuation or growth expectations
Calculations
Cash Flow per Share: $2.00M ÷ 1.00M = $2.00
P/CF Ratio: $50 ÷ $2.00 = 25.00x
Example: Company X
Company Data
Stock Price: $50.00
Cash Flow: $2,000,000
Shares Outstanding: 1,000,000
Cash Flow Type: Operating
Calculations
Cash Flow per Share = $2,000,000 ÷ 1,000,000 = $2.00
P/CF Ratio = $50.00 ÷ $2.00 = 25x
This indicates the stock may be overvalued
P/CF Ratio Guide
P/CF < 10x: Undervalued
Low ratio suggests potential value
P/CF 10-20x: Fair Value
Reasonable valuation range
P/CF 20-35x: Premium
High growth expectations
P/CF > 35x: Overvalued
May indicate overvaluation
Note: Compare P/CF ratios within the same industry for meaningful analysis. Growth companies often have higher ratios.
Understanding Price-to-Cash Flow Ratio
What is P/CF Ratio?
The Price-to-Cash Flow (P/CF) ratio compares a company's stock price to its cash flow per share. It helps investors evaluate whether a stock is undervalued or overvalued based on cash generation ability.
Why Use P/CF Ratio?
- •Cash flow is harder to manipulate than earnings
- •Better reflects actual cash generation
- •Useful for identifying undervalued stocks
- •Complements other valuation metrics
P/CF Ratio Formulas
Cash Flow per Share = Total Cash Flow ÷ Shares Outstanding
P/CF Ratio = Stock Price ÷ Cash Flow per Share
Cash Flow Types
- •Operating Cash Flow: Cash from core business operations
- •Free Cash Flow: Operating cash flow minus capital expenditures
- •FCFE: Cash flow available to equity holders
Advantages of P/CF Ratio
- ✓Less susceptible to accounting manipulation
- ✓Reflects actual cash generation ability
- ✓Useful for companies with non-cash charges
- ✓Better intrinsic value assessment
Limitations
- ⚠Multiple cash flow definitions can cause confusion
- ⚠Cannot be used for companies with negative cash flow
- ⚠Industry comparison is essential
- ⚠Should be used with other valuation metrics