what is the price to free cash flow ratio 
price to free cash flow p fcf is an equity valuation metric that compares a company s per share market price to its free cash flow fcf this metric is very similar to the valuation metric of price to cash flow but is considered a more exact measure because it uses free cash flow which subtracts capital expenditures capex from a company s total operating cash flow thereby reflecting the actual cash flow available to fund non asset related growth companies can use this metric to base growth decisions and maintain acceptable free cash flow levels understanding the price to free cash flow ratioa company s free cash flow is essential because it is a primary indicator of its ability to generate additional revenues which is a crucial element in stock pricing the price to free cash flow metric is calculated as follows price to fcf market capitalization free cash flow begin aligned text price to fcf frac text market capitalization text free cash flow end aligned price to fcf free cash flowmarket capitalization for example a company with 100 million in total operating cash flow and 50 million in capital expenditures has a free cash flow total of 50 million if the company s market cap value is 1 billion it has a ratio of 20 meaning its stock trades at 20 times its free cash flow 1 billion 50 million you might find a company that has more free cash flows than it does market cap or one that is very close to equal amounts of both for example a market cap of 102 million and free cash flows of 110 million would result in a ratio of 93 there is nothing inherently wrong with this if it is typical for the company s industry however suppose the company operates in an industry where comparable company market caps hover around 200 million in that case you may want to investigate further to determine why the business s market cap is low free cash flows or market caps that are non typical for a company s size and industry should raise the flag for further investigation the business might be in financial trouble or it might not it s critical to find out 