Price To Free Cash Flow (P/FCF)
Amazon.com, Inc. had a price to free cash flow ratio of -113.21 at the end of FY 2021.
The price to free cash flow ratio relates a company's valuation to its free cash flow. It is calculated by dividing the market capitalization by the free cash flow. Free cash flow is calculated by subtracting the company's capital expenditures from its operating cash flow. A company with a small positive P/FCF ratio may represent better value than a company with a high ratio.
A company can use the free cash flow it generates to pay down its debts, invest back into the company or pay out to shareholders in the form of dividends or share buybacks. It is common to use the levered free cash flow when using the Discounted Cash Flow (DCF) model to value a company. This is because the levered free cash flow is the free cash flow available to shareholders.