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Bet on 4 Stocks with Rising Cash Flow to Scoop Big Gains
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Investing in stocks with big profits and solid earnings surprises might appear a popular strategy in the ongoing reporting cycle. However, betting on stocks with a healthy cash level might be far more rewarding. This is because even though profit is a company’s goal, cash is the lifeblood for its existence.
In fact, even a profit-making company can face a dearth of cash flow if its profits are not channelized in the right direction and finally end up filing for bankruptcy. But a company with a healthy cash level not only enjoys the flexibility to make decisions, chase potential investments and run its growth engine but also weathers any market mayhem.
Obviously, in any business, cash moves in and out, but it is net cash flow that explains how much money that company is actually generating. If a company is experiencing a positive cash flow then it denotes an increase in its liquid assets, which gives it 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, which in turn lowers its flexibility to support these moves.
However, having a positive cash flow alone is not sufficient to predict a company’s growth. In fact, consistent growth can only be achieved by a company when this positive cash flow is increasing because this improvement indicates management’s efficiency in regulating its cash movements and lesser dependency on external financing sources for running its business. Ultimately, it reflects a company’s true financial health.
Therefore, in the thick of the current earnings season, brace yourself with the following screen to bet on stocks with increasing cash flows.
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 four stocks that made it through the screen:
Argan, Inc. (AGX - Free Report) , headquartered in Rockville, MD, through its subsidiaries, offers a full range of services to the power industry including 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 moved north in the past two months.
BayerischeMotorenWerke AG (BAMXF - Free Report) is a multi-brand automobile manufacturer that focuses on the premium segments of the worldwide automobile and motorcycle markets. It has three brands: BMW, MINI and Rolls-Royce. The company is headquartered in Munich, Germany and has a VGM score of B. It experienced a rise in estimates over the past 30 days.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of A, 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 67.30%.
Hallador Energy Company is engaged in the production of steam coal. The company is headquartered in Denver, CO and has a VGM score of A. It experienced a rise in estimates over the past 30 days.
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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Bet on 4 Stocks with Rising Cash Flow to Scoop Big Gains
Investing in stocks with big profits and solid earnings surprises might appear a popular strategy in the ongoing reporting cycle. However, betting on stocks with a healthy cash level might be far more rewarding. This is because even though profit is a company’s goal, cash is the lifeblood for its existence.
In fact, even a profit-making company can face a dearth of cash flow if its profits are not channelized in the right direction and finally end up filing for bankruptcy. But a company with a healthy cash level not only enjoys the flexibility to make decisions, chase potential investments and run its growth engine but also weathers any market mayhem.
Obviously, in any business, cash moves in and out, but it is net cash flow that explains how much money that company is actually generating. If a company is experiencing a positive cash flow then it denotes an increase in its liquid assets, which gives it 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, which in turn lowers its flexibility to support these moves.
However, having a positive cash flow alone is not sufficient to predict a company’s growth. In fact, consistent growth can only be achieved by a company when this positive cash flow is increasing because this improvement indicates management’s efficiency in regulating its cash movements and lesser dependency on external financing sources for running its business. Ultimately, it reflects a company’s true financial health.
Therefore, in the thick of the current earnings season, brace yourself with the following screen to bet on stocks with increasing cash flows.
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 four stocks that made it through the screen:
Argan, Inc. (AGX - Free Report) , headquartered in Rockville, MD, through its subsidiaries, offers a full range of services to the power industry including 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 moved north in the past two months.
BayerischeMotorenWerke AG (BAMXF - Free Report) is a multi-brand automobile manufacturer that focuses on the premium segments of the worldwide automobile and motorcycle markets. It has three brands: BMW, MINI and Rolls-Royce. The company is headquartered in Munich, Germany and has a VGM score of B. It experienced a rise in estimates over the past 30 days.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of A, 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 67.30%.
Hallador Energy Company is engaged in the production of steam coal. The company is headquartered in Denver, CO and has a VGM score of A. It experienced a rise in estimates over the past 30 days.
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 »