A high, or increasing Price to Cash Flow ratio is a positive sign, as less cash flow is required to maintain a stock price at a certain level. Caution should be used this ratio, as the stock price also can be influenced by external events such as market condition changes and the overall public opinion of the company, as well as internal events such as changes in sales. Since the
Market Price of Common Stock is multiplied by the
Average Shares Outstanding, even modest changes to the stock price can impact the results of this ratio.
