Definition:

Operating Cash Flow Per Share (OCFPS) is a financial metric that measures the cash generated from a company's operations on a per-share basis. It provides insight into a company's ability to generate cash flow from its core business activities, relative to the number of shares outstanding.

Examples

For example, if a company has an operating cash flow of $10 million and 5 million shares outstanding, the OCFPS would be $2.00. This means that each share is effectively generating $2.00 in cash from operations.

Formula:

Operating Cash Flow per Share = Operating Cash Flow / Number of Shares Outstanding

How to use the metric:

Investors and analysts use OCFPS to assess a company's financial health and operational efficiency. A higher OCFPS indicates that a company is generating more cash from its operations per share, which can be a sign of strong financial performance and the potential for future growth. It is often used in conjunction with other financial metrics to provide a comprehensive view of a company's financial status.

Limitations:

OCFPS does not account for capital expenditures, debt repayments, or other cash outflows that may affect a company's overall cash position. It also does not consider non-cash items that may impact net income, such as depreciation and amortization. Additionally, OCFPS can be influenced by changes in working capital, which may not reflect the company's long-term cash-generating ability.

Applies to:

OCFPS is applicable across various industries, particularly those where cash flow generation is a critical indicator of financial health, such as manufacturing, retail, and technology. It is useful for companies with stable and predictable cash flows.

Doesn't apply to:

OCFPS may be less relevant for industries with significant capital expenditures or those that rely heavily on financing activities, such as utilities or real estate. In these industries, other metrics like Free Cash Flow or Funds from Operations may provide a more accurate picture of financial performance.

Summary:

Operating Cash Flow per Share is a valuable metric for evaluating a company's ability to generate cash from its core operations on a per-share basis. While it provides useful insights into operational efficiency and financial health, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's overall performance.