Price/Free cash flow (P/FCF)
Market cap divided by a year of free cash flow: FCF yield turned upside down.
Worked example · a round-number company
Market cap$10.0B÷Free cash flow$1.0B=P/FCF10.0xHow to read it
↓Lower is better. Pays less for each dollar of cash the business could hand back.
Example Co. 10.0x
Under 15x15x to 30xOver 30x
Over 30x usually means investors expect strong growth.
Keep in mind
- Blank when free cash flow is zero or negative.
- Stock-based pay isn't subtracted.