Price-to-Cash Flow Ratio

Cash flow is harder to flatter than accounting profit because it has to show up in the bank, subject to working-capital timing. The ratio is a check on P/E when accruals are large.

State which cash flow you use. Operating cash flow, cash earnings, and free cash flow are not the same denominator.

A price-to-cash-flow ratio far below the P/E can mean earnings are conservative, or that this year's cash flow was boosted by collecting old receivables. Look at several years.

Operating cash flow still includes no charge for maintenance capital expenditure. A low multiple on operating cash flow can hide a business that must spend most of that cash to stand still.