What does P/FCF mean?
The price-to-free cash flow ratio (P/FCF) is a valuation method used to compare a companyÕs current share price to its per-share free cash flow. Free Cash Flow is calculated from the Statement of Cash Flows as Cash From Operations minus Capital Expenditures. This ratio is similar to price earnings, but omitting purely "paper only" expenses.
Stockopedia explains P/FCF...
Free Cashflow is the amount left over a company can use to pay down debt, distribute as dividends, or reinvest to grow the business.
This ratio is similar to Price to Earnings, but omitting purely "paper only" expenses.
Some companies report high profits, but they can't turn those profits into cash! A company can't survive without cash, and if it can't generate it internally it will have to go to outside investors to support it, resulting in either share dilution or increased borrowing.
