Zacks.com featured expert Kevin Matras highlights: AES Corporation, BJ's Wholesale Club, Inc., CGI Group, Inc., Mediacomm Communications Corporation and Ralcorp Holdings.

For Immediate Release

Chicago, IL – May 20, 2009 - Kevin Matras screens for companies with Sales Growth that is greater than their Earnings Growth. Stocks in this week’s article include AES Corporation (AES - Snapshot Report), BJ's Wholesale Club, Inc. (BJ - Analyst Report), CGI Group, Inc. (GIB - Snapshot Report), Mediacomm Communications Corporation (MCCC - Snapshot Report) and Ralcorp Holdings (RAH - Snapshot Report). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109.

Screen of the Week written by Kevin Matras of Zacks Investment Research:

Lately, I've been running screens to try and assess a company's real value.

The Price to Earnings ratio (P/E) is probably the most common ratio in determining whether a company is under or overvalued.

However, the Price to Cash Flow (P/CF) is another great ratio to do just that.

Cash, of course, is vital to a company's financial health. Especially nowadays, cash is needed to finance operations, invest in the business, etc.

And cash can't really be manipulated on the income statement like earnings can.

The reason why some like this measurement better than the P/E ratio is because the net income of the cash flow portion rightly adds depreciation and amortization back in, since these are not cash expenditures.

Whereas the net income that goes into the earnings portion of the P/E ratio does not include either expense, thus artificially reducing the income and skewing the P/E ratio. (Depreciation and amortization are non-cash expenditures, meaning that they don't take any money out of the company's bank account.)

So many analysts prefer using the Price to Cash Flow metric to judge a stock's value.

And just as the P/E ratio is calculated by dividing Price by its Earnings per share -- the Price to Cash Flow ratio is calculated by dividing Price by Cash Flow per share.

Finally, like a P/E ratio, the lower the number, the better.

Currently, the average Price to Cash Flow (P/CF) for the stocks in the S&P 500 is a little over 8.2. For the P/E ratio it's over 15.6.

But like the P/E ratio, a value of less than 20 is considered good.

However, make sure you compare the stocks P/CF to its industry as different industries will have different numbers that are considered normal.

The Screen

The screen I'm running today is relatively simple.

• Zacks Rank = 1 (Only Strong Buys get thru.)
• One Year Projected Growth Rate >= Average for the S&P 500 (I'm looking for above market growth rates.)
• Current Cash Flow >= 5 Year Average Cash Flow (I want to see the company's cash position improving.)
• Price to Cash Flow <= Median for its industry (I want to see companies with valuations lower than the median for their respective groups.)

There were 34 stocks that came thru this week's screen. Here are 5 of them:

AES Corporation (AES - Snapshot Report)
BJ's Wholesale Club, Inc. (BJ - Analyst Report)
CGI Group, Inc. (GIB - Snapshot Report)
Mediacomm Communications Corporation (MCCC - Snapshot Report)
Ralcorp Holdings (RAH - Snapshot Report)

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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