12/24/2023 0 Comments Free cash flow formula![]() Imagine there are two companies who are competitors – Company A and Company Bīased on their current share prices, you calculated the P/FCF of both companies:Ĭompany B is trading at a lower P/FCF than Company A. ![]() P/FCF is used to compare how expensive the company is relative to its: If you were to buy Apple’s share right now, you are essentially paying $26.80 for every dollar of its free cash flow. This means that Apple is worth $26.80 for every $1 of its free cash flow. Price to Free Cash Flow (P/FCF) = Share Price / Free Cash Flow Per Share = 165.12 / 6.16 = 26.80 For ‘Period Type’, choose ‘Quarterly’ in the drop down barįree Cash Flow / Share = 2.69 + 1.03 + 1.14 + 1.30 = $6.16.Click ‘Financials’, then click ‘Cash Flow’.Type ‘Apple’ in the search bar and click enter.To do that, we have to refer to the most recent 4 quarters of Apple’s quarterly cash flow statements: Sourceįor the table above, you can find these figures by following the steps below: We have to find the most recent free cash flow that Apple generated in the past 12 months. With Google search, you should be able to find the current share price of Apple. We will use Apple Inc as an example to calculate its Price to Free Cash Flow as of 1 March 2022: 1. P/FCF = Share Price / Free Cash Flow Per Share. In this segment, we will learn how to calculate P/FCF and use Apple Inc for a step-by-step example on calculating P/FCF. If a company’s P/FCF is 20, it means that the company is worth $20 for every $1 of its free cash flow per share.įree Cash Flow refers to the cash available to the firm after taking into account cash outflow for operations and buying of assets.įree Cash Flow = Operating Cash Flow – Capital Expenditures ![]() Price to Free Cash Flow (P/FCF) is a valuation metric that measures the value of the company for every dollar of free cash flow per share.
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