Definition

EV/FCF compares a company's enterprise value to its free cash flow (operating cash flow minus capex), showing how expensive the business is relative to the cash it actually generates. It is one of the most direct measures of value because FCF cannot be easily manipulated. A low multiple may indicate undervaluation or strong cash generation, while a high multiple reflects growth premium or capital-light models. The ideal range varies by sector — capital-intensive industries like energy trade at 10–15×, while software and consumer staples can trade at 25–35×.