Zacks: Airlines Have Attractive Cash Flow Levels

When assessing stocks, many investors use various metrics such as the price-to-earnings ratio (P/E) and market capitalization. But it’s important not to overlook cash flow, which is “always needed in a rough market,” according to a recent Zacks article. Generally speaking, the lower a company’s price-to-cash-flow ratio (P/CF) is, the better.

Airlines’ P/CF ratios have been attractive lately with the decline in fuel prices—one of the industry’s top expenses—not to mention more disciplined capacity growth. This has been a boon for the U.S. Global Jets ETF (JETS).

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Article summary written by U.S. Global Investors.

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Cash Flow is a measure of the amount of cash generated by a company’s normal business operations.

Price-to-earnings ratio (P/E) ratio is determined by dividing the price of the stock by the company’s forecasted earnings per share. The price-to-cash-flow (P/CF) ratio measures a stock’s price to its cash flow per share. It is an indicator of a stock’s valuation.

All opinions expressed and data provided are subject to change without notice. Opinions are not guaranteed and should not be considered investment advice.

Price to Book ratio is determined by dividing the price of the stock by the company’s book value.

The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company’s expected growth. In general, the P/E ratio is higher for a company with a higher growth rate.

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