Price/cash flow (projected) for a stock is the ratio of the company’s most recent month-end share price to the company’s estimated cash flow per share (CPS) for the current fiscal year. Cash flow measures the ability of a business to generate cash and it acts as a gauge of liquidity and solvency. Morningstar calculates internal estimates for the current year CPS based on the most recently reported CPS and average historical cash flow growth rates.
For portfolios, this data point is calculated by taking an asset-weighted average of the cash flow yields (C/P) of all the stocks in the portfolio and then taking the reciprocal of the result.
Note: This is one of the five value factors used to calculate the Morningstar Investment Style Box.
Benefit
The price/cash flow ratio can tell investors approximately how much they're paying for a dollar of cash flow. Because of differences in accounting standards across the globe, price/earnings ratios are not always reasonable for comparing companies from different countries. Price/Cash Flow attempts to provide a consistent standard of comparison.
Origin
Morningstar generates this figure in-house based on stock statistics from our internal equities databases. For stocks, this figure is calculated monthly. For funds and portfolios, Morningstar updates this figure upon receipt of the most-recent portfolio holdings from the asset manager.