Investing

The price of free cash flow

What is the price of free cash flow?

The price of free cash flow is an equity valuation metric that compares a company’s market price per share to its free cash flow per share (FCF). This metric is very similar to the price-to-cash flow valuation metric, but is considered a more accurate metric because it uses free cash flow, which subtracts capital expenditures (CAPEX) from a company’s total operating cash flow, reflecting available Actual cash flow to fund non-asset related growth. Companies use this metric when they need to expand their asset base to grow their business or simply maintain an acceptable level of free cash flow.

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