Price/Cash Flow

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Price/Cash Flow

The price/cash flow (P/CF) ratio is not as commonly used or as well known as the other measures used. It is calculated similarly to P/E, except that it uses operating cash flow instead of net income as the denominator.

P/CF = (Stock Price) / (Operating Cash Flow per Share)

Advantages of P/CF

Cash flow can be less subject to accounting shenanigans than earnings because it measures actual cash, not paper or accounting profits. Price/cash flow can be helpful for firms such as utilities and cable companies, which can have more cash flow than reported earnings. Price/cash flow can also be used in place of P/E when there are so many one-time expenses that reported earnings are negative.