The price to free cash flow and price to earnings ratios simply measure different things. P/E measures price relative to earnings per share while P/FCF measures price to free cash flow.
Earnings per share comes from the income statement, and the most important difference here is that earnings per share includes non-cash expenses like depreciation and amortization. If a company buys a piece of equipment, they'll often depreciate that asset over the course of 5,10, 15 years etc, depending on the life of the equipment.
That piece of equipment cost them money in year 1, but the depreciation will be added to the income statement for the life of the asset. So although it didn't cost the company any physical cash outside of the original purchase, it is taken off net income.
So, earnings per share is, in some cases, not actually a good indicator of a company's cash on hand.
Instead, a lot of people use free cash flow. This is calculated by taking the company's net income (which is used to calculate EPS) and adding back all of those non-cash expenses to get what is called Operating Cash Flow, or Cash From Operations.
You then take the capital expenditures (expenses to run the business) and subtract them from operating cash flows. You are left with free cash flow, which is the true cash the company has available.
Warren Buffett has famously been quoted calling free cash flow "owners earnings" as it is the most important type of cash flow to a business.
The price to free cash flow is relatively easy. If a company has $5 in free cash flow per share and trades at $50, it is trading at 10x its free cash flow.
As per what is a "good" ratio, it is highly dependent on the industry and sector. Some sectors, like big tech for example (Microsoft, Google, Apple) will trade at large FCF multiples. 20-30x FCF is not out of the question. Whereas slower growing industries may trade at lower multiples.
The one thing free cash flow is very useful for is calculating a payback period. If we have a company that generates $1 in free cash flow a year and trades for $10/share, it will take you 10 years to break even on your investment if that company gave back all the free cash flow to investors or retained all the earnings.
When you look at it this way, it seems insane to pay 20-30x free cash flow for a particular business. Which, in some cases, is accurate. However, the payback example above would be if a company never grew cash flow. If we anticipate that cash flows will grow, we can pay more for a company and still have a shorter payback period.
For example, that same company that has $1 in free cash flow per share and trading for $10. If we assume it will grow free cash flow by 25 cents a year, we are paid back much sooner
Year 1: $1.25
Year 2: $1.50
Year 3: $1.75
Year 4: $2
Year 5: $2.25
Year 6: $2.50
This is $11.25 in free cash flow generated through the first 6 years of you owning the business.
I hope this makes sense. It certainly gets a bit more complicated than this, and for some industries, like financials, free cash flow isn't the best to utilize and earnings per share is better. But for the most part, FCF is the better ratio to use when looking at companies.