Categorized | Fundamental Analysis

Cash Flow Evaluation

The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a value standpoint, of a company’s stock. This metric compares the stock’s market price to the amount of cash flow the company generates on a per-share basis. Cashflow is an important indicator of a company ability to continue revenue operation. A company with a healthy profit/loss status could still have cashflow problems if its customers delay or default their payments. Such companies usually would have an unusually high account receivable to Revenue ratio as a warning sign. If they are unable to collect their due earnings, the company would have to write off the amounts in the next year. This might also result in the company being unable to satisfy its short run operating cost and resulted in higher interest paid to the banks by taking out short term loans.  

This ratio is similar to the price/earnings ratio, except that the price/cash flow ratio (P/CF) is seen by some as a more reliable basis than earnings per share to evaluate the acceptability, or lack thereof, of a stock’s current pricing. The argument for using cash flow over earnings is that the former is not easily manipulated, while the same cannot be said for earnings, which, unlike cash flow, are affected by depreciation and other non-cash factors.

Price/cash flow= Stock Price per share/Operating cash flow per share

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Symbol Bid Ask Spread
EURUSD 1.18130 1.18150 2
GBPUSD 1.31990 1.32020 3
USDCAD 1.24600 1.24630 3
USDJPY 112.980 113.000 2
USDCHF 0.97990 0.98020 3
AUDUSD 0.78620 0.78650 3
NZDUSD 0.70390 0.70440 5
EURGBP 0.89480 0.89510 3
EURCHF 1.15770 1.15800 3
EURJPY 133.470 133.500 3
AUDJPY 88.830 88.880 5
GBPJPY 149.130 149.190 6
XAUUSD 1280.65 1281.05 40
XAGUSD 16.955 17.005 5