Operating cash flow divided by shares outstanding. More reliable than EPS for companies with significant non-cash charges. When OCF per share consistently exceeds EPS, it signals high-quality earnings.
Formula
Description
The amount of operating cash flow generated per share of stock. Growing OCF per share indicates improving cash generation on a per-shareholder basis. This is a more reliable metric than EPS for companies with significant non-cash charges.
Interpretation
Look for consistent growth over time. Compare to EPS: OCF/share consistently above EPS is a quality signal. Declining OCF/share while EPS grows may indicate earnings are being sustained by accruals rather than cash.
Related Integrity Indicators
Operating cash flow divided by total debt. Measures how quickly a company could repay all its debt from operating cash flow alone. Above 0.5 means the company could theoretically pay off all debt in two years from operations. Below 0.15 signals heavy debt relative to cash generation.
Free cash flow divided by net income. Above 1.0 means the company generates more cash than its reported profits, a hallmark of high-quality earnings. Consistently below 0.7 is a red flag.
Compares operating cash flow to net income. When cash flow exceeds earnings, the company's profits are well-supported by actual cash. This is one of the nine criteria in the Piotroski F-Score.
What percentage of revenue must be reinvested in capital assets. Below 8% is capital-light and attractive. Buffett prefers businesses that don't require large ongoing capital outlays to maintain their competitive position.
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