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Forget Profit, Bet on 5 Stocks with Increasing Cash Flows
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Parking your hard earned money in stocks based on top-line growth and increasing profit numbers might be a good option. But choosing stocks based on cash flows can be far more rewarding. This is because, even a profit-making company can face cash troubles and end up filing bankruptcy. But a company with solid cash flow can endure any market mayhem.
In fact, cash indicates a company’s true financial health. It holds the key to its existence, development and success. It offers the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. Moreover, cash indicates that profits are being channelized in the right direction.
Cash moves in and out of any business, but it is net cash flow that explains how much money the company is actually making. A positive cash flow indicates an increase in the company’s liquid assets, which provide the means to meet debt obligations, shell out for expenses, reinvest in business, endure downturns and finally return wealth to shareholders. On the other hand, a negative cash flow indicates a decline in the company’s liquidity and in turn lowers its flexibility to support these moves.
Yet, positive cash flow alone is not sufficient to predict a company’s future growth. A company can consistently grow only when this positive cash flow is rising. Because, increasing cash flow helps management to efficiently handle finance, operations and investing activities.
Screening Parameters:
To find out stocks that have seen increasing cash flow over time, we ran the screen for those whose cash flow in the latest reported quarter was at least equal to or greater than the 5-year average cash flow per common share. This implies a positive trend and increasing cash over a period of time.
In addition to this, we chose:
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the company’s future performance.
Current Price greater than or equal to $5: This sieves out low-priced stocks.
VGM Scoreof B or better: This score is also of great assistance in selecting stocks. Importantly, this scoring system helps in picking the winning stocks in their individual industry categories.
Here are five of the eight stocks that made it through the screen:
Stamps.com Inc. , based in El Segundo, CA, provides Internet-based services for mailing or shipping letters, packages or parcels anywhere in the U.S. The stock has a VGM score of ‘B’. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 61.42%.
Ducommun Inc. (DCO - Free Report) , headquartered in Carson, CA, manufactures components and assemblies principally for domestic and foreign commercial and military aircraft, and space programs. The company came up with an earnings surprise of 21.43% in the second quarter ended Jul 2, 2016 and has experienced a rise in estimates over the past two months. Ducommun has a VGM score of “A”.
Argan, Inc. (AGX - Free Report) , headquartered in Rockville, MD, through its subsidiaries, offers a full range of services to the power industry including the engineering, procurement and construction, commissioning, operations management, maintenance, project development and consulting services. Also, the company provides telecommunications infrastructure services, integrated fabrication, construction and plant services through its subsidiaries.
Argan has a VGM score of “A”. It came up with an earnings surprise of 84.29% in the fiscal second quarter ended Jul 31, 2016 and its estimates for the current fiscal year has moved north.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of “B”, is a leading manufacturer, processor and distributor of metals and other engineered materials for building products, vehicular and other industrial markets. The company is headquartered in Buffalo, NY. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 74.53%.
Hallador Energy Company , through its wholly owned subsidiary, Sunrise Coal, LLC, is engaged in the production of coal in the Illinois Basin for the electric power generation industry. The company is headquartered in Denver, CO and has a VGM score of “A”.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Forget Profit, Bet on 5 Stocks with Increasing Cash Flows
Parking your hard earned money in stocks based on top-line growth and increasing profit numbers might be a good option. But choosing stocks based on cash flows can be far more rewarding. This is because, even a profit-making company can face cash troubles and end up filing bankruptcy. But a company with solid cash flow can endure any market mayhem.
In fact, cash indicates a company’s true financial health. It holds the key to its existence, development and success. It offers the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. Moreover, cash indicates that profits are being channelized in the right direction.
Cash moves in and out of any business, but it is net cash flow that explains how much money the company is actually making. A positive cash flow indicates an increase in the company’s liquid assets, which provide the means to meet debt obligations, shell out for expenses, reinvest in business, endure downturns and finally return wealth to shareholders. On the other hand, a negative cash flow indicates a decline in the company’s liquidity and in turn lowers its flexibility to support these moves.
Yet, positive cash flow alone is not sufficient to predict a company’s future growth. A company can consistently grow only when this positive cash flow is rising. Because, increasing cash flow helps management to efficiently handle finance, operations and investing activities.
Screening Parameters:
To find out stocks that have seen increasing cash flow over time, we ran the screen for those whose cash flow in the latest reported quarter was at least equal to or greater than the 5-year average cash flow per common share. This implies a positive trend and increasing cash over a period of time.
In addition to this, we chose:
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the company’s future performance.
Current Price greater than or equal to $5: This sieves out low-priced stocks.
VGM Score of B or better: This score is also of great assistance in selecting stocks. Importantly, this scoring system helps in picking the winning stocks in their individual industry categories.
Here are five of the eight stocks that made it through the screen:
Stamps.com Inc. , based in El Segundo, CA, provides Internet-based services for mailing or shipping letters, packages or parcels anywhere in the U.S. The stock has a VGM score of ‘B’. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 61.42%.
Ducommun Inc. (DCO - Free Report) , headquartered in Carson, CA, manufactures components and assemblies principally for domestic and foreign commercial and military aircraft, and space programs. The company came up with an earnings surprise of 21.43% in the second quarter ended Jul 2, 2016 and has experienced a rise in estimates over the past two months. Ducommun has a VGM score of “A”.
Argan, Inc. (AGX - Free Report) , headquartered in Rockville, MD, through its subsidiaries, offers a full range of services to the power industry including the engineering, procurement and construction, commissioning, operations management, maintenance, project development and consulting services. Also, the company provides telecommunications infrastructure services, integrated fabrication, construction and plant services through its subsidiaries.
Argan has a VGM score of “A”. It came up with an earnings surprise of 84.29% in the fiscal second quarter ended Jul 31, 2016 and its estimates for the current fiscal year has moved north.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of “B”, is a leading manufacturer, processor and distributor of metals and other engineered materials for building products, vehicular and other industrial markets. The company is headquartered in Buffalo, NY. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 74.53%.
Hallador Energy Company , through its wholly owned subsidiary, Sunrise Coal, LLC, is engaged in the production of coal in the Illinois Basin for the electric power generation industry. The company is headquartered in Denver, CO and has a VGM score of “A”.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »