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Look Beyond Profit, Buy 5 Stocks with Increasing Cash Flows
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You can be lured by big profits and solid earnings surprises this earnings season. But looking beyond profits and figuring out a company’s cash position is far more rewarding. This is because, even though profit is a company’s goal, cash is its lifeblood for existence, development and success, and indeed a measure of its resiliency.
Even a profit-making company can have a dearth of cash flow and might go bankrupt while meeting its obligations. But a healthy cash position indicates that the company’s profits are efficiently channeled to its reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
While cash moves in and out of any business, it is net cash flow that shows how much money the company is actually generating. A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. On the other hand, a negative cash flow implies a decline in the company’s liquidity, which 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. This is because increasing cash flow implies management’s efficiency in regulating its cash movements, generating more money from its business, depending less on outside financing and finally its improving fundamentals.
Therefore, this earnings season and beyond, don’t look at profits only before picking stocks. Make sure to look for stocks with dependable and 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 winning stocks in their individual industry categories.
Here are five out of the eight stocks that made it through the screen:
Braskem S.A. (BAK - Free Report) is the largest petrochemical operator in Latin America that produces and sells thermoplastic resins. The company is based in Brazil. The stock has a VGM score of A. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 increased 1.5% and 6.1%, respectively, to $3.37 and $2.26 per share.
Moreover, Braskem returned 24.5% over the past three months, way better than the 6.7% gain witnessed by the Zacks categorized Oil & Gas Integrated International industry.
Gray Television, Inc. (GTN - Free Report) is a communications company headquartered in Atlanta, GA. It presently owns and/or operates 100 television stations across 54 television markets. Gray Television has a VGM score of A. Its projected growth rate for earnings per share is 68.2% for 2016.
Also, Gray Television logged in a return of 14.2% over the past three months, which is way better than the 7.2% gain witnessed by the Zacks categorized Broadcast Radio And Television industry.
International Consolidated Airlines Group, S.A. (ICAGY - Free Report) is a holding company for British Airways and Iberia engaged in the provision of passenger and cargo transportation services in the U.K., Spain, the U.S. and rest of the world. The stock has a VGM Score of B. The Zacks Consensus Estimate for 2017 earnings rose 5.7% over the last 30 days. Also, over the past three months, International Consolidated Airlines’ shares recorded a return of nearly 25.5%.
Calavo Growers, Inc. (CVGW - Free Report) , headquartered in Santa Paula, CA, engages in the procurement and marketing of avocados and other perishable foods as well as the preparation and distribution of processed avocado products. Calavo Growers has a VGM Score of B. The Zacks Consensus Estimate for fiscal year ending Oct 31, 2017, earnings increased 5.9% to $2.50 per share over the last 60 days.
HOYA Corporation (HOCPY - Free Report) is a specialty manufacturer of optical glass. The company's business activities include information technology, eye care, medical and imaging systems. It is headquartered in Tokyo. HOYA Corporation has a VGM Score of B. The Zacks Consensus Estimate for fiscal year ending March 2017 earnings increased 1.9% over the past 30 days.
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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Look Beyond Profit, Buy 5 Stocks with Increasing Cash Flows
You can be lured by big profits and solid earnings surprises this earnings season. But looking beyond profits and figuring out a company’s cash position is far more rewarding. This is because, even though profit is a company’s goal, cash is its lifeblood for existence, development and success, and indeed a measure of its resiliency.
Even a profit-making company can have a dearth of cash flow and might go bankrupt while meeting its obligations. But a healthy cash position indicates that the company’s profits are efficiently channeled to its reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
While cash moves in and out of any business, it is net cash flow that shows how much money the company is actually generating. A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. On the other hand, a negative cash flow implies a decline in the company’s liquidity, which 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. This is because increasing cash flow implies management’s efficiency in regulating its cash movements, generating more money from its business, depending less on outside financing and finally its improving fundamentals.
Therefore, this earnings season and beyond, don’t look at profits only before picking stocks. Make sure to look for stocks with dependable and 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 winning stocks in their individual industry categories.
Here are five out of the eight stocks that made it through the screen:
Braskem S.A. (BAK - Free Report) is the largest petrochemical operator in Latin America that produces and sells thermoplastic resins. The company is based in Brazil. The stock has a VGM score of A. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 increased 1.5% and 6.1%, respectively, to $3.37 and $2.26 per share.
Moreover, Braskem returned 24.5% over the past three months, way better than the 6.7% gain witnessed by the Zacks categorized Oil & Gas Integrated International industry.
Gray Television, Inc. (GTN - Free Report) is a communications company headquartered in Atlanta, GA. It presently owns and/or operates 100 television stations across 54 television markets. Gray Television has a VGM score of A. Its projected growth rate for earnings per share is 68.2% for 2016.
Also, Gray Television logged in a return of 14.2% over the past three months, which is way better than the 7.2% gain witnessed by the Zacks categorized Broadcast Radio And Television industry.
International Consolidated Airlines Group, S.A. (ICAGY - Free Report) is a holding company for British Airways and Iberia engaged in the provision of passenger and cargo transportation services in the U.K., Spain, the U.S. and rest of the world. The stock has a VGM Score of B. The Zacks Consensus Estimate for 2017 earnings rose 5.7% over the last 30 days. Also, over the past three months, International Consolidated Airlines’ shares recorded a return of nearly 25.5%.
Calavo Growers, Inc. (CVGW - Free Report) , headquartered in Santa Paula, CA, engages in the procurement and marketing of avocados and other perishable foods as well as the preparation and distribution of processed avocado products. Calavo Growers has a VGM Score of B. The Zacks Consensus Estimate for fiscal year ending Oct 31, 2017, earnings increased 5.9% to $2.50 per share over the last 60 days.
HOYA Corporation (HOCPY - Free Report) is a specialty manufacturer of optical glass. The company's business activities include information technology, eye care, medical and imaging systems. It is headquartered in Tokyo. HOYA Corporation has a VGM Score of B. The Zacks Consensus Estimate for fiscal year ending March 2017 earnings increased 1.9% over the past 30 days.
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 »