Back to top

Image: Bigstock

4 Top-Rated Stocks to Bet On With Increasing Cash Flows

Read MoreHide Full Article

Achieving profit is no doubt a company’s goal, but having a healthy cash flow is imperative to its existence, development and success. And why not? Even a company generating profits succumbs to failure and faces bankruptcy, while meeting its obligations if it has a dearth of cash flow. However, one can efficiently tide over any market mayhem if it has the cash to shield it.

In fact, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves. This offers flexibility to make decisions, chase potential investments and fuel its growth engine. It is indeed a true indicator of a company’s financial health and a measure of resiliency.

Analyzing a company’s cash-generating efficiency has indeed become more relevant amid the health crisis that gave rise to uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns.

To figure out this efficiency, one needs to consider a company’s net cash flow. While in any business cash moves in and out, it is net cash flow that explains how much money a 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 merely does not secure a company’s future growth. To ride on the growth curve, a company must have its cash flow increasing because that indicates management’s efficiency in regulating its cash movements and less dependency on outside financing for running its business.

Therefore, keep yourself abreast with the following screen to bet on stocks with rising cash flows.

Screening Parameters:

To find 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 the four out of nine stocks that qualified the screening:

Matson Inc. (MATX - Free Report) provides ocean transportation and logistics services. It offers shipping services in Hawaii, Guam, and Micronesia islands, and expedited service from China to Southern California. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $3.72 for 2020 earnings has been revised 24% upward over the past 30 days.

Aviat Networks, Inc. (AVNW - Free Report) is a global supplier of wireless network solutions and network management software, backed by a suite of professional services and support. Currently, the stock has a VGM Score of B. The Zacks Consensus Estimate of $2.95 for fiscal 2021 earnings moved 18% north in 60 days’ time.

Daimler AG with its businesses Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans and Daimler Buses, is a globally renowned producer of premium passenger cars and manufacturer of commercial vehicles in the world. The stock currently carries a VGM Score of A. The Zacks Consensus Estimate of $3.38 for current-year earnings moved 1.2% upward over the past week.

Herc Holdings, Inc. (HRI - Free Report) is an equipment rental supplier across North America and in international markets. The company has a VGM Score of A, at present. The Zacks Consensus Estimate of $2.66 for the ongoing-year earnings has moved 1.9% north in the past week.

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 back-testing 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.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Aviat Networks, Inc. (AVNW) - free report >>

Matson, Inc. (MATX) - free report >>

Herc Holdings Inc. (HRI) - free report >>