The P/FCF multiple reflects the ratio of a company's market capitalization to its free cash flow.
P/FCF = Market capitalization / Free Cash Flow
Market capitalization is the market value of a company based on the current market price and the number of shares outstanding.
Free cash flow (FCF) - cash flow from the company's core business minus capital investments.
FCF = Cash Flow From Operating Activities - Capital Expenditure (CAPEX)
A lower multiplier value (relative to industry and historical values) indicates that the share is undervalued, which means that the share is cheaper relative to its free cash flow.
Higher P/FCF values indicate that the stock is overvalued.
P/FCF is used to compare companies in the same industry. Also, P/FCF can be analyzed over a long period, based on which it can be concluded whether the company's cash flow is improving or worsening compared to its market capitalization.
According to Ranks methodology, this indicator is analyzed in the Value block and used along with other indicators to calculate the score. The indicator is presented as a % of repurchased shares.
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