From the share price and operating cash flow per share, compute the price-to-cash-flow (P/CF) ratio.
Input Data
Results
At a glance:The P/CF ratio is the share price divided by operating cash flow per share, valuing the stock on cash generation rather than accounting earnings.
Formula
priceToCashFlow = sharePrice / cashFlowPerShare
How to Use
- Enter the share price.
- Enter the operating cash flow per share.
- Read the P/CF ratio.
FAQ
How is P/CF different from the P/E ratio?
P/E uses earnings per share as the denominator, while P/CF uses operating cash flow per share. Earnings are an accounting profit that includes non-cash items like depreciation, amortisation and provisions, and are more exposed to accounting policy and one-offs; cash flow reflects the money actually received and is harder to dress up. For industries with heavy depreciation or earnings distorted by non-cash items, P/CF often shows the true valuation better — use both together for a fuller picture.
Which industries suit a P/CF valuation?
Heavy-asset industries with large depreciation or amortisation fit best — telecom, utilities, property, shipping, infrastructure. Their accounting profit is often dragged down (even to a loss) by huge depreciation, yet the operating cash flow is quite steady. Judged only by P/E they look 'expensive' or 'unprofitable', but P/CF reveals the real earning power. Light-asset, low-depreciation sectors (some services) show little difference between P/CF and P/E.
Is a lower P/CF always better?
Generally a lower P/CF means cheaper relative to cash flow, but beware 'cheap for a reason'. A low multiple may reflect the market's fear of falling future cash flow, stalled growth, or a dim industry outlook. Also, this tool uses operating cash flow, before the capex needed to sustain the business; if capex is large, free-cash-flow valuation is more conservative. Judge with growth, debt and peer comparison.
Are there specific Hong Kong sectors where P/CF is especially useful?
In Hong Kong, the 'heavy-asset, rent-collecting' sectors suit P/CF best, because their accounting profit is distorted by large non-cash charges (depreciation, investment-property revaluation, amortisation) while the actual operating cash flow is stable. Concretely: first, property and REITs — Hong Kong has many property companies and REITs whose profit swings with non-cash items like investment-property fair-value changes, so P/E jumps around and misleads, while cash-flow metrics (P/CF, or FFO common for REITs) are more meaningful; second, utilities (power, gas, water) — huge assets, heavy depreciation, but stable, predictable cash flow; third, telecoms — large network and licence amortisation depress accounting profit; fourth, infrastructure, ports, toll roads, shipping — capital-intensive with big depreciation. By contrast, banks/financials generally do not use P/CF (their 'cash flow' concept differs; they lean on P/B and ROE), and light-asset services/consumer brands show little P/CF vs P/E gap. Always compare within the same sector — a property stock's P/CF against a tech stock is meaningless; compare with sector peers and the company's own history.
Should I use operating cash flow or free cash flow for P/CF?
Both are used, differing in conservatism and purpose. This calculator (and the most common P/CF definition) uses operating cash flow as the denominator — it reflects cash received from the core business, before deducting the capex needed to maintain and grow the business. It is larger, more stable and easy to get, good for quick peer comparison. But for capex-heavy firms, operating cash flow 'overstates' the truly pocketable, freely usable cash. For a more conservative, shareholder-relevant figure, use free cash flow (FCF = operating cash flow − capex), giving P/FCF (price ÷ free cash flow). Example: a heavy-asset firm with high operating cash flow but large annual capex may look cheap on P/CF, but its P/FCF after capex is far less attractive. Practical advice: use P/CF (operating) for quick screening and cross-peer comparison; for a deep valuation of a capital-intensive firm, also look at P/FCF. Either way, keep the cash-flow definition consistent between numerator and denominator and compare on the same basis as peers.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.