GlossaryIntermediate
Price-to-Cash-Flow (P/CF) Ratio
A valuation multiple comparing share price to operating cash flow per share, an alternative to P/E that avoids some accounting distortions.
The Price-to-Cash-Flow (P/CF) ratio divides a company's share price by its operating cash flow per share, offering an alternative to P/E that's based on actual cash generated from operations rather than reported accounting earnings.
Because cash flow is generally considered harder to distort through accounting choices than reported net income, P/CF is sometimes preferred specifically for companies where earnings quality is in question. See Kaavon's dedicated P/CF Ratio article for the full calculation.
Examples
- P/CF is sometimes preferred over P/E specifically when a company's reported earnings are suspected of being distorted by non-cash accounting items.
- P/CF uses operating cash flow, a different figure from Free Cash Flow, which further subtracts capital expenditures.