Canada's publishing behemoth, The Thomson Corporation (NYSE:TOC) reported two sets of earnings last week. The first set, the "real" earnings, were $0.05 for first-quarter 2004 versus $0.10 per share for Q1 2003. Not good.

But flip those earnings over, shake out the results from both quarters' discontinued operations and onetime gains, and the comparison reverses itself: Last year's profits become a $0.04 per-share loss, and this year's $0.05 in profits remain almost unchanged at $0.04.

Hmm. Ever wonder why Motley Fool Hidden Gems readers prefer to look at free cash flow instead of "earnings"? Subjective calls like the above are one reason.

So let us look at the free cash flow picture. In the year-ago quarter, Thomson had $41 million in real cash earnings. This quarter, the number was up nearly three-fold to $157 million.

As for where the cash is coming from, well, that is something that just warms my lawyer's heart. You see, Thomson's "West" division all but owns the U.S. legal publishing market, and competitor Lexis-Nexis (owned by Anglo-Dutch publisher Reed Elsevier (NYSE:ENL)) is but a distant second in this arena. So it comes as no surprise that Thomson's legal division -- already the largest of its four divisions -- grew its revenues by 15% this past quarter, and further grew its earnings before interest, taxes, depreciation and amortization (EBITDA) by an outsized 38%.

The company's other three divisions (education, financial, and scientific) also grew their revenues. It should be mentioned that all three increases combined did not equal the legal division's uptick.

On to valuation. Thomson pulls in $1.98 per diluted share in free cash flow annually. At yesterday's closing share price of $31.78, that gives it an enterprise value-to-free cash flow ratio just shy of 19. Analysts expect Thomson to increase earnings by 12% per annum over the next five years -- a little bit slower than the publishing sector as a whole. Now, I happen to think that Thomson is a superior company, and therefore will probably perform better than its peers, but just assume the analysts have this one pegged.

That would give Thomson an EV/FCF/growth ratio of 1.6 -- which is about 20% cheaper than the market as a whole. And Thomson is currently paying out a 2.4% dividend yield -- a 30% premium to the market's payout ratio.

Cheaper and with a better dividend than the competition? In my book, that makes Thomson a "buy."

Take a free trial to Motley Fool Hidden Gems to learn more about stalking free-cash-flow growth, or to Motley Fool Income Investor if dividends are your thing.

Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.