price-to-cash-flow (P/CF) ratio
The price-to-cash-flow ratio (P/CF) compares a company’s stock price with the cash it generates from operations, known as operating cash flow. This figure comes from the company’s statement of cash flows.
P/CF = price per share ÷ operating cash flow per share
For example, if a company reports $10 billion in operating cash flow and has one billion shares outstanding, its cash flow per share is $10. If the stock trades at $100, the P/CF ratio is (100 ÷ 10) = 10. Investors are paying $10 for every dollar of annual operating cash flow.
Why P/CF matters
Unlike net income, which can shift with accounting choices, cash flow tracks the money coming in and out of the business. Operating cash flow strips away much of the “noise” from noncash charges, tax adjustments, or differences in depreciation methods. That’s why many investors see P/CF as a cleaner measure of valuation than P/E.
Free cash flow and P/FCF
Operating cash flow shows money generated by the business, but it doesn’t account for capital expenditures (capex in stock analyst lingo). Capex is cash that must be spent to maintain or expand operations; examples include new facilities, equipment, and technology upgrades. Free cash flow (FCF) deducts those costs.
FCF = operating cash flow − capital expenditures
Some analysts prefer the price-to-free-cash-flow ratio (P/FCF) because it shows how much investors are paying for cash that’s truly “free” to return to shareholders, pay down debt, or reinvest. P/FCF is often seen as a stricter measure of value, especially for capital-intensive industries such as telecommunication networks or airlines.
P/CF is especially useful when earnings are negative or distorted. A company may show a loss on its income statement but still generate strong cash flow from operations. In that case, P/E becomes meaningless while P/CF still provides insight into the company’s valuation.
Reading P/CF in context
P/CF values aren’t one-size-fits-all. What looks low—or high—depends on the industry. For example, as of mid-2025, Apple (AAPL) had a P/CF near 29, reflecting strong growth and investor confidence in its ability to generate cash flow from operations. Walmart (WMT) P/CF hovered around 22, showing the market’s willingness to pay a premium for dependable but lower-margin retail cash flow. Disney (DIS) was closer to 12, more in line with a traditional media and entertainment business. Energy giant Exxon Mobil (XOM), with its P/CF of 8.5, highlighted how cyclical industries often carry lower P/CF multiples even when cash flow is robust.
Part of a bigger picture
The price-to-cash-flow (P/CF) ratio is just one of the many fundamental indicators that analysts and investors use to gauge value. Learn how the P/CF, P/E, PEG, and others compare in Britannica Money’s guide to financial ratios.
P/CF in practice
Cash flow isn’t immune to swings. Changes in working capital, big capital expenditures, and even the exact timing of receivables and payables can make cash flow jump around from year to year. And like any single ratio, P/CF doesn’t tell the whole story. It works best alongside P/E, P/B, or P/S to see how the market values a company across different measures.
Cash is hard to fake. That’s why many investors turn to P/CF as a check on the story told by earnings. A stock with a lofty P/E but a modest P/CF may be generating more real value than its income statement suggests. Conversely, a company with flashy revenue but weak cash flow may not be creating durable value at all.