What is a bad price to cash flow ratio? (2024)

What is a bad price to cash flow ratio?

Even as there is not one number considered a good price to cash flow ratio, anything low and single-digit may be a sign of an undervalued stock, while a higher ratio may hint at the exact opposite scenario.

(Video) What Is A Good Price To Cash Flow Ratio
(Epic Real Estate Investing)
What is a good price to cash flow ratio?

A good price-to-cash-flow ratio is any number below 10. Lower ratios show that a stock is undervalued when compared to its cash flows, meaning there is a better value in the stock.

(Video) Cash Flow vs. Profit: What’s the Difference? | Business: Explained
(HBS Online)
What is a bad cash flow ratio?

An operating cash flow ratio of less than one indicates the opposite—the firm has not generated enough cash to cover its current liabilities. To investors and analysts, a low ratio could mean that the firm needs more capital. However, there could be many interpretations, not all of which point to poor financial health.

(Video) Bill Ackman: Free Cashflow is All You Should Care About
(Investor Talk)
What is a good ratio for cash flow?

Operating cash flow ratio

This ratio calculates how much cash a business makes from its sales. A preferred operating cash flow number is greater than one because it means a business is doing well and the company has enough money to operate.

(Video) What Is Free Cash Flow? FCF Explained
(NetSuite)
What is a good FCF ratio?

A “good” free cash flow conversion rate would typically be consistently around or above 100%, as it indicates efficient working capital management. If the FCF conversion rate of a company is in excess of 100%, that implies operational efficiency.

(Video) Warren Buffett: Should You Invest in a Stock With a High P/E Ratio?
(Investor Center)
What cash ratio is too high?

High current ratio: This refers to a ratio higher than 1.0, and it occurs when a business holds on to too much cash that could be used or invested in other ways. Low current ratio: A ratio lower than 1.0 can result in a business having trouble paying short-term obligations.

(Video) What is PRICE TO FREE CASH FLOW? | Stock Market Basics
(Everything Money)
Should the price to free cash flow ratio be high or low?

A higher P/FCF ratio suggests that the market values the company's cash flow at a premium. It indicates an optimistic view of the company's prospects. Conversely, a lower P/FCF ratio may imply that the market values the company's cash flow at a discount.

(Video) Stock Multiples: How to Tell When a Stock is Cheap/Expensive
(The Plain Bagel)
Which cash flow ratio is most important?

Cash flow margin ratio

Cash flow margin ratio is a more reliable metric than net profit, as it gives a much clearer picture of the amount of cash generated per pound of sales.

(Video) Warren Buffett explains the reasons for higher P/E ratios
(The Financial Review)
What is a bad cash flow statement?

Negative cash flow is when your business has more outgoing than incoming money. You cannot cover your expenses from sales alone. Instead, you need money from investments and financing to make up the difference. For example, if you had $5,000 in revenue and $10,000 in expenses in April, you had negative cash flow.

(Video) Fastenal Stock pick of the day #investment #PassiveIncome #Dividends #investing #Stocks
(Vested Interest)
What is a high vs low cash ratio?

A: A higher cash ratio means that a company has more liquid capital available and lower short-term liabilities in need of payment, while a lower cash ratio means that there is a higher amount of liabilities and less cash on hand as an asset. Therefore, it is more desirable to have a higher cash ratio than a lower one.

(Video) What is Free Cash Flow (FCF) | Stock Market Fundamental Analysis Classes - 16
(pranjal kamra)

What is Tesla's FCF ratio?

Hence, Tesla's Price-to-Free-Cash-Flow Ratio for today is 137.37. During the past 13 years, Tesla's highest Price-to-Free-Cash-Flow Ratio was 544.60. The lowest was 27.53. And the median was 154.11.

(Video) Free Cash Flow: Back to Basics
(Aswath Damodaran)
Is 0.2 a good cash ratio?

0.2 is considered to be the ideal cash ratio.

What is a bad price to cash flow ratio? (2024)
Is a small cash ratio bad?

A cash ratio of less than 1 means you have more current liabilities than cash on hand. However, that is not necessarily a bad sign. You may still have enough current assets (accounts receivable and inventory) on hand to cover your company's current liabilities.

Is a higher cash flow ratio better?

The cash flow to net income ratio compares your operating cash flow to your net income. Because it provides insight into how well you're converting net income into cash flow, a higher ratio is a positive sign.

Why is price to cash flow important?

Price-to-Cash Flow (P/CF) ratio is a widely-used financial metric for stock valuation. It is used to assess the value of a company by comparing its stock price to its cash flows generated from operations. The P/CF ratio is a useful tool for determining whether a stock is undervalued or overvalued in the market.

What is good cash flow vs bad cash flow?

Companies with a positive cash flow have more money coming in, while a negative cash flow indicates higher spending. Net cash flow equals the total cash inflows minus the total cash outflows. U.S. Securities and Exchange Commission. "Beginners' Guide to Financial Statements."

How do you know if a cash flow statement is good?

The net cash flow figure for any period is calculated as current assets minus current liabilities. Ongoing positive cash flow points to a company that is operating on a strong footing. Continued negative cash flow may indicate a company is in financial trouble.

Is negative cash flow OK?

Yes, a profitable company can have negative cash flow. Negative cash flow is not necessarily a bad thing, as long as it's not chronic or long-term. A single quarter of negative cash flow may mean an unusual expense or a delay in receipts for that period. Or, it could mean an investment in the company's future growth.

Is 0.5 a good cash ratio?

There is no ideal figure, but a ratio of at least 0.5 to 1 is usually preferred.

Is 0.8 a good quick ratio?

Generally, a Quick Ratio of 1.0 or greater is considered adequate to ensure a company's ability to pay its current obligations. A value of less than 1.0 signals a problem in meeting short-term obligations.

What is Apple's free cash flow?

106.9B USD. Based on the financial report for Dec 30, 2023, Apple Inc's Free Cash Flow amounts to 106.9B USD.

What is Ford's free cash flow?

Ford Motor annual free cash flow for 2023 was $6.682B, a 51500% decline from 2022. Ford Motor annual free cash flow for 2022 was $-0.013B, a 100.14% decline from 2021. Ford Motor annual free cash flow for 2021 was $9.56B, a 48.4% decline from 2020.

How much free cash flow does Amazon have?

Amazon annual free cash flow for 2023 was $36.813B, a 418.2% decline from 2022. Amazon annual free cash flow for 2022 was $-11.569B, a 27.57% increase from 2021. Amazon annual free cash flow for 2021 was $-9.069B, a 129.24% decline from 2020.

Is a high cash coverage ratio good or bad?

A coverage ratio, broadly, is a measure of a company's ability to service its debt and meet its financial obligations. The higher the coverage ratio, the easier it should be to make interest payments on its debt or pay dividends.

Is a high cash coverage ratio good?

The higher your cash coverage ratio, the better the financial condition your business is in. But how do you know when you should be concerned? Any time that your cash coverage ratio drops below 2 can signal financial issues, while a drop below 1 means your business is in danger of defaulting on its debts.

You might also like
Popular posts
Latest Posts
Article information

Author: Prof. Nancy Dach

Last Updated: 05/09/2024

Views: 6147

Rating: 4.7 / 5 (57 voted)

Reviews: 88% of readers found this page helpful

Author information

Name: Prof. Nancy Dach

Birthday: 1993-08-23

Address: 569 Waelchi Ports, South Blainebury, LA 11589

Phone: +9958996486049

Job: Sales Manager

Hobby: Web surfing, Scuba diving, Mountaineering, Writing, Sailing, Dance, Blacksmithing

Introduction: My name is Prof. Nancy Dach, I am a lively, joyous, courageous, lovely, tender, charming, open person who loves writing and wants to share my knowledge and understanding with you.