Price to Free Cash Flow

A ratio that is used to estimate a firm’s future financial health by comparing the firm’s market value to its cash flow.   This is another valuation tool that is similar to the P/E ratio but removes the non-cash factors.  When comparing companies they should be in the same industry because the ratio will vary depending on the industry. In general, the higher the Price to Free Cash Flow number, the more expensive the company is thought to be.

Price to Free Cash Flow =

Market Capitalization
Free Cash Flow