How do you read P/FCF (price to free cash flow)?

Like P/E, but on cash rather than accounting profit, which is harder to dress up. In a year of heavy investment cash flow drops and the ratio rises, without the business getting worse.

P/FCF (price to free cash flow)

Valuation

Market cap against the cash left over after investment.

How it is worked out

Market cap divided by free cash flow over the last twelve months.

How to read it

Like P/E, but on cash rather than accounting profit, which is harder to dress up.
In a year of heavy investment cash flow drops and the ratio rises, without the business getting worse.

Example

Market cap $20bn, free cash flow $1bn: a P/FCF of 20.

Related terms

Free cash flow (FCF)The cash the business brought in from running itself, less what it spent on equipment and buildings.
Free cash flow yieldFree cash flow as a share of market cap: P/FCF turned upside down.
P/E (price to earnings)How many dollars the market pays today for each dollar of the last twelve months' earnings.

The other pages on US stocks, free to read. On the company pages, the last three fiscal years are open to everyone, five with a free account, and every year with Ploutos Investor.

US stocksThe market today, the sectors, the largest companies and the week's results.The market's sectorsThe 11 sectors side by side: returns, share of the market, median P/E and dividend.Compare stocksTwo companies side by side: price over up to ten years, with and without dividends, and every figure.US dividend stocksEach dividend's yield next to whether the company's cash covers it and whether it was ever cut.

Explanations of terms for learning, with examples from SEC filings.