Price-to-Cash-Flow Ratio Calculator: Is This Stock Cheap?

Is a 15.00 P/CF good or bad?

On the defaults — a $150.00 share price and $10.00 of cash flow per share — the P/CF ratio is 15.00. The P/CF ratio is the price you pay for each dollar of cash the business throws off — the share price divided by the cash flow per share. As a rough yardstick, a P/CF below 10.00 can mean the market values the business cheaply against its cash — or that the cash flow is about to fall. A P/CF of 15.00 means the market pays $15 for each $1 of annual cash flow per share — the market expects the cash flow to keep coming, or the stock is expensive for the cash it throws off. A P/CF above 20.00 can mean the market expects the cash flow to grow — or that the stock is expensive for the cash it throws off. A 15.00 P/CF is neither good nor bad on its own: it is the price per dollar of cash flow, and the industry decides what that price means.

Three things about the model are worth stating plainly.

First, the P/CF ratio is $150.00 ÷ $10.00 = 15.00. Second, the share price needed for a 20.00 P/CF is 20.00 × $10.00 = $200.00. And third, the CFPS needed for a 20.00 P/CF is $150.00 ÷ 20.00 = $7.50; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $150.00 share price, $10.00 cash flow per share, target P/CF 20.00.

Line 1 — the P/CF ratio. The P/CF ratio is $150.00 ÷ $10.00 = 15.00.

Line 2 — the share price needed. The share price needed for a 20.00 P/CF is 20.00 × $10.00 = $200.00.

Line 3 — the CFPS needed. The CFPS needed for a 20.00 P/CF is $150.00 ÷ 20.00 = $7.50.

Line 4 — the check. $200.00 ÷ $10.00 = 20.00, the target P/CF; and $150.00 ÷ $7.50 = 20.00, the target P/CF.

Every branch, checked

Share price $180.00: Share price $180.00; cash flow per share $10.00; P/CF ratio 18.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $9.00 — With a share price of $180.00 the P/CF rises to 18.00 — the market pays $18 for each $1 of cash the business throws off.

CFPS $12.00: Share price $150.00; cash flow per share $12.00; P/CF ratio 12.50; share price needed for the 20.00 target $240.00; CFPS needed for the 20.00 target $7.50 — With CFPS of $12.00 the P/CF falls to 12.50 — the market pays $12.50 for each $1 of cash the business throws off.

Share price $90.00: Share price $90.00; cash flow per share $10.00; P/CF ratio 9.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $4.50 — With a share price of $90.00 the P/CF falls to 9.00 — the market pays $9 for each $1 of cash the business throws off.

CFPS $8.00: Share price $150.00; cash flow per share $8.00; P/CF ratio 18.75; share price needed for the 20.00 target $160.00; CFPS needed for the 20.00 target $7.50 — With CFPS of $8.00 the P/CF rises to 18.75 — the market pays $18.75 for each $1 of cash the business throws off.

Share price $75.00: Share price $75.00; cash flow per share $10.00; P/CF ratio 7.50; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $3.75 — With a share price of $75.00 the P/CF falls to 7.50 — the market pays $7.50 for each $1 of cash the business throws off.

CFPS $0: Share price $150.00; cash flow per share $0.00; P/CF ratio — (undefined: no cash flow to divide the price by); share price needed for the 20.00 target —; CFPS needed for the 20.00 target — — With no cash flow there is nothing to divide the price by, so the P/CF ratio cannot be computed — the calculator shows “—” with a note, never Infinity or NaN.

What-if bars — Share price $200.00, CFPS $15.00, share price $100.00: share price $200.00: P/CF 20.00; CFPS $15.00: P/CF 10.00; share price $100.00: P/CF 10.00 — A $200.00 share price gives a P/CF of 20.00; CFPS of $15.00 gives a P/CF of 10.00; a $100.00 share price gives a P/CF of 10.00.

The reverses, worked backwards

Smallest whole-cent share price for the P/CF to reach 15.00: At the displayed $150.00 the figures are Share price $150.00; cash flow per share $10.00; P/CF ratio 15.00; share price needed for the 15.00 target $150.00; CFPS needed for the 15.00 target $10.00. At the displayed $150.00 the P/CF is 15.00 (exactly 15.00). At $149.99 the price is 1 cent short of the $150.00 needed — and the unrounded P/CF is 14.999, which displays as 15.00 after rounding, so $150.00 is the smallest whole-cent share price for the P/CF to reach 15.00.

Smallest whole-cent share price for the P/CF to reach 20.00: At the displayed $200.00 the figures are Share price $200.00; cash flow per share $10.00; P/CF ratio 20.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $10.00. At the displayed $200.00 the P/CF is 20.00 (exactly 20.00). At $199.99 the price is 1 cent short of the $200.00 needed — and the unrounded P/CF is 19.999, which displays as 20.00 after rounding, so $200.00 is the smallest whole-cent share price for the P/CF to reach 20.00.

Largest whole-cent CFPS for the P/CF to STAY at or above 15.00: At the displayed $10.00 the figures are Share price $150.00; cash flow per share $10.00; P/CF ratio 15.00; share price needed for the 15.00 target $150.00; CFPS needed for the 15.00 target $10.00. At the displayed $10.00 the P/CF is 15.00 (exactly 15.00). At $10.01 the CFPS is 1 cent over the $10.00 needed — and the unrounded P/CF is 14.9850, which displays as 14.99 — visibly below 15.00, so $10.00 is the largest whole-cent CFPS for the P/CF to stay at or above 15.00.

Smallest whole-cent share price for the P/CF to reach 10.00: At the displayed $100.00 the figures are Share price $100.00; cash flow per share $10.00; P/CF ratio 10.00; share price needed for the 10.00 target $100.00; CFPS needed for the 10.00 target $10.00. At the displayed $100.00 the P/CF is 10.00 (exactly 10.00). At $99.99 the price is 1 cent short of the $100.00 needed — and the unrounded P/CF is 9.999, which displays as 10.00 after rounding, so $100.00 is the smallest whole-cent share price for the P/CF to reach 10.00.

Largest whole-cent CFPS for the P/CF to STAY at or above 20.00: At the displayed $7.50 the figures are Share price $150.00; cash flow per share $7.50; P/CF ratio 20.00; share price needed for the 20.00 target $150.00; CFPS needed for the 20.00 target $7.50. At the displayed $7.50 the P/CF is 20.00 (exactly 20.00). At $7.51 the CFPS is 1 cent over the $7.50 needed — and the unrounded P/CF is 19.9734, which displays as 19.97 — visibly below 20.00, so $7.50 is the largest whole-cent CFPS for the P/CF to stay at or above 20.00.

Smallest whole-cent share price for the P/CF to reach 25.00: At the displayed $250.00 the figures are Share price $250.00; cash flow per share $10.00; P/CF ratio 25.00; share price needed for the 25.00 target $250.00; CFPS needed for the 25.00 target $10.00. At the displayed $250.00 the P/CF is 25.00 (exactly 25.00). At $249.99 the price is 1 cent short of the $250.00 needed — and the unrounded P/CF is 24.999, which displays as 25.00 after rounding, so $250.00 is the smallest whole-cent share price for the P/CF to reach 25.00.

A warning about the neighbours: the R1, R2, R4 and R6 neighbours show as the target when rounded to two decimals, but their unrounded P/CF is a hair below the target — 14.999, 19.999, 9.999 and 24.999. The R3 and R5 neighbours do not even show as the target: 14.9850 displays as 14.99 and 19.9734 displays as 19.97, visibly below 15.00 and 20.00. An investor underwriting on the unrounded P/CF would still say no where the unrounded figure misses the line. The page prints the unrounded neighbour value in full so the rounding does not mislead you: 14.999, 19.999, 14.9850, 9.999, 19.9734 and 24.999.

What the defaults assume

The defaults are a $150.00 share price, $10.00 of cash flow per share and a target P/CF of 20.00 — Share price $150.00; cash flow per share $10.00; P/CF ratio 15.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $7.50. With Share price $180.00, Share price $180.00; cash flow per share $10.00; P/CF ratio 18.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $9.00. With CFPS $12.00, Share price $150.00; cash flow per share $12.00; P/CF ratio 12.50; share price needed for the 20.00 target $240.00; CFPS needed for the 20.00 target $7.50. With Share price $90.00, Share price $90.00; cash flow per share $10.00; P/CF ratio 9.00; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $4.50. With CFPS $8.00, Share price $150.00; cash flow per share $8.00; P/CF ratio 18.75; share price needed for the 20.00 target $160.00; CFPS needed for the 20.00 target $7.50. With Share price $75.00, Share price $75.00; cash flow per share $10.00; P/CF ratio 7.50; share price needed for the 20.00 target $200.00; CFPS needed for the 20.00 target $3.75. With CFPS $0, Share price $150.00; cash flow per share $0.00; P/CF ratio — (undefined: no cash flow to divide the price by); share price needed for the 20.00 target —; CFPS needed for the 20.00 target —. With What-if bars — Share price $200.00, CFPS $15.00, share price $100.00, share price $200.00: P/CF 20.00; CFPS $15.00: P/CF 10.00; share price $100.00: P/CF 10.00. With CFPS $0, P/CF ratio — (undefined: no cash flow to divide the price by). With Share price $0, P/CF ratio 0.00. With Share price $149.99, P/CF ratio 15.00. With CFPS $10.01, P/CF ratio 14.99. With Share price $150.00, P/CF ratio 15.00. With Share price $199.99, P/CF ratio 20.00. With CFPS −$5.00, P/CF ratio −30.00 (unrounded −30). With P/CF bars, share price $200.00: P/CF 20.00; CFPS $15.00: P/CF 10.00; share price $100.00: P/CF 10.00.

A note on the rounding: with a share price of $149.99 the unrounded P/CF is 14.999, which rounds half-up to 15.00 — but it is still below the 15.00 line. With CFPS of $10.01 the unrounded P/CF is 14.9850, which rounds to 14.99 — visibly below the 15.00 line. With a share price of $199.99 the unrounded P/CF is 19.999, which rounds half-up to 20.00 — but it is just below the 20.00 line. The page prints the unrounded values so the rounding does not mislead you.

Output · formula · meaning

Who uses this

• The investor checking a value stock before buying: they learn a $150.00 share price on $10.00 of cash flow per share is a 15.00 P/CF — and they check the $200.00 reverse to see the share price a 20.00 P/CF needs.
• The shareholder watching a cash-generating business: they learn dividends, buybacks and debt repayment all come out of cash, not earnings — and they check the $7.50 reverse to see the cash flow a 20.00 P/CF needs.
• The value hunter comparing two stocks in one industry: they learn a 15.00 P/CF in a utility and a 15.00 P/CF in a software company are different stories — and they check the $150.00 reverse to see the share price a 15.00 P/CF needs.
• The student learning valuation ratios: they learn the P/CF is the share price divided by the cash flow per share — the price you pay for each dollar of cash the business throws off — and they check the $100.00 reverse to see the share price a 10.00 P/CF needs.

Accuracy & limitations

The math is first-principles: the P/CF ratio is the share price ÷ cash flow per share; the share price needed at the target is the target P/CF times the cash flow per share; the CFPS needed at the target is the share price divided by the target P/CF — all rounded to two decimals half-up. The reverses are judged on the UNROUNDED P/CF: a neighbour one cent short shows as the target when rounded to two decimals, but its unrounded P/CF is below the target, so it does not meet the bar — and the R3 and R5 neighbours do not even show as the target, displaying 14.99 and 19.97 — the page prints the unrounded neighbour value in full. A negative P/CF means negative cash flow: at −$5.00 of CFPS the P/CF is −30.00 (unrounded −30) — a negative P/CF means the business is burning cash — operating cash flow is negative, so the company spends more cash than it takes in — and a negative P/CF is not a bargain signal, it is a distress signal — so the P/CF is negative and the calculator shows the negative figure with a note, never hides it and never shows “—” for it. Zero cash flow is undefined: with no cash flow there is nothing to divide the price by, so the P/CF ratio cannot be computed — the calculator shows “—” with a note, never Infinity or NaN. What the model cannot do is judge the stock: operating cash flow and free cash flow are not the same thing — operating cash flow is the cash from running the business, free cash flow is what is left after the business pays for the equipment and buildings it needs to keep running — so a P/CF built on operating cash flow flatters a capital-hungry business, so check which cash flow your number uses; compare P/CFs within one industry, because a 15.00 P/CF in a utility and a 15.00 P/CF in a software company are different stories; and the P/CF says nothing about earnings, debt or the quality of the cash flow. Use it to see the price you pay for each dollar of cash the business throws off — then read the rest of the accounts.

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