Zacks.com Featured Expert Kevin Matras Highlights: Bare Escentuals, Inc., Cantel Medical Corp., HealthSpring, Inc., Toro Company and Viacom Inc.NASDAQ NASDAQ
in full National Association of Securities Dealers Automated Quotations
U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : BARE), Cantel Medical Corporation (NYSE NYSE
See: New York Stock Exchange : CMN CMN Common
CMN Children's Miracle Network (since 1983; Salt Lake City, Utah)
CMN Certificate of Medical Necessity
CMN Canadian Museum of Nature
CMN Community Mapping Network
CMN Common Information ), HealthSpring, Inc. (NYSE: HS), Toro Toro may refer to:
- Denominación de Origen Toro, the Spanish wine region
- Toró, the nickname of Rafael Ferreira Francisco, Brazilian football (soccer) player
Screen of the Week written by Kevin Matras of Zacks Investment Research:
The Price to Earnings ratio (or P/E) is probably the most common ratio in determining whether a company is under or overvalued Overvalued
A stock whose current price is not justified by the earnings outlook or price/earnings (P/E) ratio and thus, expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the market price of the stock or from a deterioration in a .
However, the Price to Cash Flow (or P/CF) is another great ratio to do just that.
Cash of course is vital to a company's financial health, especially nowadays, in order to finance operations The execution of the joint finance mission to provide financial advice and guidance, support of the procurement process, providing pay support, and providing disbursing support.See also financial management. , invest in the business, etc. And cash can't really be manipulated on the Income Statement like earnings can.
The reason why some people like this measurement better than the P/E ratio is that the net income of the Cash Flow portion rightly adds back in depreciation and amortization, since these are not cash expenditures. Whereas the net income that goes into the Earnings portion of the P/E ratio does not add these in, thus artificially reducing the income and skewing the P/E ratio.
So many analysts prefer using the Price to Cash Flow metric to judge a stock's value.
And just like the P/E ratio is calculated by dividing the Price by its Earnings per share -- the Price to Cash Flow ratio is calculated by dividing the Price by its Cash Flow per share. Also 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 9.6. For the 12-month forward P/E forward P/E
The price-earnings ratio of a firm's common stock calculated as the current stock price divided by estimated earnings per share for the coming year. Compare trailing P/E. ratio, it's 15.3.
But just like the P/E ratio, a value of less than 15 to 20 is generally considered good.
But make sure you compare the stock's P/CF to its Industry, since different Industries will have different numbers that are considered normal.
For example: the average Price/Cash Flow for Gold Mining companies is about 30, whereas it's about 3 for Telecom.
The screen I'm running today is relatively simple:
* Zacks Rank equal to 1 (Only Strong Buys get thru.)
* One Year Projected Growth Rate greater than or equal to Average for the S&P 500 (Looking for above-market growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. .)
* Current Cash Flow greater than or equal to 5 Year Average Cash Flow (I want to see the company's cash position improving.)
* Price to Cash Flow less than or equal to Median for its Industry (I want to see companies with valuations lower than the median for their respective groups.)
There were 30 stocks that came thru this week's screen. Here are 5 of them:
BARE Bare Escentuals, Inc.
CMN Cantel Medical Corp.
HS HealthSpring, Inc.
TTC Toro Company
VIA.B Viacom Inc.
Start looking for value stocks Value stocks
Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries. in new ways with this week's screen. Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: http://at.zacks.com/?id=111
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|Date:||Nov 11, 2009|
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