A stock's most recent price divided by the cash-flow per share of the latest fiscal year.
Benefit
For international stocks, price/cash flow can be a more meaningful figure than price/earnings. Because earnings are calculated in a variety of ways worldwide, price/cash flow minimizes accounting differences and provides a more consistent standard of valuation.
Origin
The company’s price is received from ComStock, a division of Interactive Data Corporation. Cash-flow information is found on its annual cash-flow statement.
For the Pros
Use the following formula as another valuation measure, similar to Price/Cash Flow:
Market Capitalization / Free Cash-Flow Year 1
Use the following formula to look for companies that trade at a discount to their historical valuations. The same equation can be used with Price/Book, Price/Earnings and Price/Sales:
PC Current / PC 3-Year Average