Price to Cash Flow Ratio
P/CF Ratio
The price to cash flow ratio compares the share price with operating cash flow per share. It uses money actually received instead of booked profit.
Formula
P/CF
P/CF = Share Price ÷ Operating Cash Flow per Share
Benchmark: Judge it against peers and against what you get for the multiple
Reading the number
Earnings can be booked on sales where the payment never arrives, because the buyer went bankrupt or was dishonest. Cash flow reflects money that actually came in. So P/CF sometimes tells the truth when PE flatters.
There is no universal "good" P/CF. Compare peers, and compare what each multiple buys you. Open each company's investor presentation to list its brands, then ask whether you would rather pay one multiple for one brand basket or a slightly higher multiple for a richer one. If a company does not mention a brand in its presentation, it is probably not a meaningful revenue contributor. Companies always highlight what drives their sales.
Indian example
Related ratios
Glossary terms
From the research
How The Valuation Node Approaches Research
The research method behind The Valuation Node, how assumptions are stated, how sources are chosen, and how uncertainty is disclosed in every published analysis.
ValuationWhat Three Years of a Cash Flow Statement Reveals That One Year Hides
A single year of cash flow is a snapshot. Three years is a story. Learn what the trend reveals about earnings quality, funding, and sustainability.
ValuationComparing Two Companies on ROE, and Why the Higher One Is Not Always Better
Two companies can report the same ROE for very different reasons. DuPont analysis shows why an ROE built on leverage is not the same as one built on quality.