Price to cash flow ratio

The price to cash flow ratio (PCF) is a measure of the market’s expectation of a firm’s future health. It is calculated by dividing the share price by the cash flow per share.

Like the price to earnings ratio (p/e), the PCF ratio is one that investors look at to calculate the relative cost of a business or a market. It represents the number of years of free cash flow needed to recoup the price of shares.

The idea is notional, as only a dividend rather than the full cash flow will ever be returned to investors – but it still gives an easy comparison with other companies or market, regardless of size. The future (forecast) cash flow can also be used to calculate the PCF.

The benefit of PCF over, say P/E is that it is harder to fudge the numbers, making it an increasingly popular ratio.

MoneyWeek magazine

Latest issue:

Magazine cover
In the balance

How May 2015 could hit your pocket

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Russell Napier: deflation is coming – hold on to your cash

Financial historian Russell Napier talks to Merryn Somerset Webb about the next deflationary bust – why it's coming, what it means for you, and how you can survive it.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


28 November 1660: the Royal Society is founded

After the restoration of the monarchy, members of the 'Invisible College' asked King Charles II to approve their scientific and literary society on this day in 1660.