Price to Free Cash Flow

See: Price-to-Earnings Ratio.

It's a valuation metric that is all about the cash. As in: "How much in cash profits do I get for the $27 a share I'm paying for the stock?"

So how do you get the numbers? Well, you first figure out how you're going to define free cash flow. Like...operating free cash flow? All in, net of everything free cash flow? Whatever it is, it's something like net income plus D&A...and maybe other adds and minuses around the horn.

But let's say a company has 100 million shares out, and has $270 million in free cash flow this year. Well, that's $2.70 a share in free cash, and you're paying $27 a share, or 10 times free cash flow for the stock. That's a 10% free cash flow yield for your troubles.

Good? Bad? Yeah, like the diaper company...it Depends.