In conclusion, the price/free cash flow ratio provides insight into how a company is able to reward shareholders. Companies with a low ratio may be considered cheap, while those with a high ratio may be seen as expensive. Tesla, for example, has a high P/FCF ratio due to its significant capital expenditures, while Celanese Corporation offers a more shareholder-friendly approach with lower ratios and a focus on dividends and buybacks. Understanding free cash flow is essential in evaluating a company’s ability to pay dividends and manage growth. However, the ratio has its limitations and can be impacted by various factors such as data sources and changes in the company’s financial position. Investors should consider the P/FCF ratio alongside other indicators when making investment decisions.
