What is a stock's price-to-operating cash flow ratio?

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by richie , in category: Stocks and Equities , a year ago

What is a stock's price-to-operating cash flow ratio?

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1 answer

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by daniela , 10 months ago

@richie 

The price-to-operating cash flow ratio is a financial metric used to evaluate the valuation of a stock. It compares the market price per share of a stock to the operating cash flow per share generated by the company.


The formula for calculating the price-to-operating cash flow ratio is:


Price-to-operating cash flow ratio = Market price per share / Operating cash flow per share


Operating cash flow represents the cash generated by a company's core operations, excluding one-time items and non-operating activities. It is considered a useful measure of a company's financial health as it reflects the company's ability to generate cash from its day-to-day business operations.


The price-to-operating cash flow ratio provides insight into the market's perception of a company's operating cash flow. A lower ratio suggests that the stock may be undervalued, while a higher ratio indicates that the stock may be overvalued in relation to its operating cash flow.