Price to free cash flow compares a company's per-share market price to its per-share amount of free cash flow. This metric is very similar to the valuation metric of price to cash flow but is considered more exact, owing to the fact that it uses free cash flow, which subtracts capital expenditures (CAPEX) from a company's total operating cash flow, thereby reflecting the actual cash flow available to fund non-asset-related growth. Companies use this metric when they need to expand their asset bases either in order to grow their businesses or simply to maintain acceptable levels of free cash flow.

The price to free cash flow ratio measures how much cash a company generates relative to its stock price, rather than what it records in earnings relative to its stock price, as measured by the price-earnings ratio. The price to free cash flow ratio is said to be a better investment valuation indicator than the price-earnings ratio, because cash flows cannot be manipulated as easily as earnings, which are affected by depreciation and other non-cash items. Some companies appear unprofitable because of large, non-cash expenses even though they have positive free cash flows.
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