Price to Cash-flow

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Company  P/CF  Country Industry
Metro Pacific Investments12.40PhilippinesUtilities
Aker BP ASA6.20NorwayOil and Gas
Grupo Simec B12.00MexicoBasic Materials
Morinaga13.10JapanConsumer Goods
Mebuki Financial Group27.30JapanFinancials
Hitachi Kokusai Electric22.50JapanTechnology
Moncler28.20ItalyConsumer Goods
Buzzi Unicem12.70ItalyIndustrials
PT Hanjaya Mandala Sampoerna32.20IndonesiaConsumer Goods
MRF9.30IndiaConsumer Goods
Matahari Department Store15.30IndonesiaConsumer Services
ICICI Prudential Life Insurance7.00IndiaFinancials
Dassault Aviation S.A.8.90FranceIndustrials
Postal Savings Bank of China8.60ChinaFinancials
Livzon Pharmaceutical Group15.90ChinaHealth Care
Everbright Securities (H)9.10ChinaFinancials

Price/cash-flow ratio (P/CF) is a term used in financial analysis. It is a liquidity-oriented equity ratio that reflects the ratio of stock price to cash flow per share. It requires an additional indication of what kind of cash flow (for example, gross cash flow, operating cash flow or free cash flow) is meant. In our case, Cash-flow is calculated by adding depreciations, amortizations and other non-cash items to earnings (net profits) of the year, this is call indirect method.

The P/CF can be used in addition to or in place of price-earnings ratio. The Price to Cash-flow is less susceptible to accounting technical manipulations than price to earnings ratio, because the cash flow is not affected by accounting policy measures such as eliminating of hiding expenses, modifying revenues or depreciations accounting or by alteration of payment periods.

Price to Cash-flow

For companies that determine their profit according to different accounting rules (comparison of companies from different countries), the P/CF can provide a better ratio than P/E.

However, cash-flows are due to investment and ratios suffer considerably stronger fluctuations than those calculated over earnings. It is therefore not appropriate to evaluate the result of a single financial year, but must be considered and averaged over several years.

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