PCFR shows how many times a company's actual cash-generating ability (operating cash flow) the share price represents. Because net income can be affected by non-cash items such as depreciation and extraordinary gains or losses, operating cash flow — which more closely reflects actual cash movement — is often used as a supplementary check on earnings quality.
How to read it
A low PCFR alone does not mean a stock is undervalued; as with PER and PBR, comparisons within the same industry or against peers are the basic approach.
Operating cash flow can fluctuate due to temporary factors such as changes in inventory levels, so looking at the trend over several years, not just one, can be informative.
This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.
Frequently Asked Questions
Should I look at PCFR or PER?
Neither is inherently better; they are generally used to complement each other. For companies where accounting profit diverges significantly from cash flow (for example, capital-intensive businesses with heavy depreciation), PCFR can sometimes give a picture closer to the underlying reality.
Where can I find operating cash flow?
It is reported as "cash flow from operating activities" in a company's cash flow statement, found in its earnings report or annual securities report. Dividing that figure by shares outstanding gives the per-share amount.
