P/FCF

What it is

P/FCF = Market Capitalization / FCF

Or per share: P/FCF = Share Price / FCF per Share

P/FCF is the "more honest" version of P/E — instead of accounting earnings it uses actual cash (FCF). More resistant to accounting manipulation and better reflects the company's ability to generate real value.

A general reference range for P/FCF in established companies: 15–30×. Above 40× = expensive, below 15× = potentially cheap (or a company with a problem).

Why track it

P/FCF is better than P/E for companies with:

• →High depreciation (CAPEX-heavy companies)
• →A different cash flow profile from accounting earnings
• →Active buybacks or acquisitions

Combine P/FCF with the FCF margin trend — if you buy a company with a growing FCF margin, P/FCF effectively decreases every year.

Real-world example