Price to free cash flow (P/FCF)

Also called: price to free cash flow, fcf yield

What investors pay for each 1 of free cash flow, the cash left after running and investing in the business.

Formula

P/FCF = Market cap ÷ Free cash flow

Worked example

1. Market cap = $40.0bn
2. Free cash flow = $2.2bn operating cash flow − $700m capital spending = $1.5bn
3. P/FCF = $40.0bn ÷ $1.5bn

Result: 26.7×

How to read it

Many investors trust cash more than accounting profit. An inverse view: 1 ÷ P/FCF is the free cash flow yield. A P/FCF of 25 is a 4% yield.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)