Metric
Price-to-Free-Cash-Flow
Market value relative to actual cash the business produces.
Formula
Market Cap ÷ Free Cash Flow
Definition
P/FCF is often a cleaner valuation measure than P/E because free cash flow is harder to manipulate than reported earnings.
Why it matters
It answers: how long would it take for free cash to pay back the current market cap? Lower values suggest a cheaper valuation, all else equal.
Building blocks
- Market Cap
- Total value of all shares outstanding at the current price.
- Free Cash Flow
- Cash left after operating expenses and reinvestment.
Educational information only, not investment advice. Turtleway helps you understand what a metric or concept means; it does not tell you what to buy or sell.