Price to free cash flow (P/FCF)
ValuationMarket cap as a multiple of the latest fiscal year's free cash flow.
Formula
P/FCF = market cap ÷ free cash flow (latest fiscal year, when positive)
Why it matters
This is our preferred headline multiple. Free cash flow is the money actually available to owners after sustaining the business, so P/FCF asks the cleanest version of the valuation question: how many years of distributable cash does the price represent? It resists the accrual distortions that plague P/E — depreciation schedules, write-offs, deferred taxes — because cash either came in or it did not.
What good looks like
Under 15 is inexpensive for a stable business (a ~6.7% FCF yield). 15–25 is a fair range for quality companies with moderate growth. Above 30 you are paying primarily for the future, and the reverse-DCF implied growth becomes the more useful lens. Compare each company against its own history and its sector median on the screener.
Caveats
FCF is lumpy: a heavy capex year raises the multiple and a light one lowers it, so a single-year P/FCF can misrepresent a company mid-investment-cycle. SBC add-backs flatter FCF at heavy issuers — cross-check SBC/FCF. Undefined when FCF is negative. As with all price multiples, debt is ignored; two companies at the same P/FCF with very different balance sheets are not equally cheap.