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4 Stocks Riding High on Increasing Cash Flow to Buy Now

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The year 2020 has seen unprecedented disruptions thanks to the coronavirus pandemic. After facing significant setbacks at the onset of the pandemic, markets have not only picked up but also touched fresh all-time highs. The Covid-19 relief bill is already signed and the rollout of vaccines is underway. However, the pace of immunizing Americans seems to be slower than expected and this could lead to a drag on the overall economic recovery.

Amid these, laying a wager on stocks based on profit numbers appears a popular strategy. But looking beyond profits and figuring out a company’s efficiency in generating cash flows can be far more rewarding. This is because cash is the most indispensable factor for any company. It gives strength and vitality, and is the key for its existence, development and success.

Cash is, in fact, the lifeblood of any business and is reflective of a company’s true financial health. And why not? Even a company generating profits succumbs to failure and faces bankruptcy while meeting obligations if it has a dearth of cash flow. But one can efficiently tide over any market mayhem if it has the cash to shield it.

In fact, analyzing a company’s cash-generating efficiency has indeed become more relevant amid the health crisis that has given 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 the 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.

Nautilus, Inc. (NLS - Free Report) is a designer and developer of cardio and strength fitness products, and related accessories for consumer as well as commercial use. The stock currently carries a VGM Score of A. The Zacks Consensus Estimate of $2.34 for 2020 moved significantly upward over the past two months.

Herbalife Nutrition Ltd. (HLF - Free Report) , headquartered in Los Angeles, CA, develops and distributes healthy nutrition solutions. The company has a VGM Score of B as well as a decent earnings surprise history. It surpassed estimates in each of the last four quarters at an average of 27.2%. Moreover, the Zacks Consensus Estimate of $3.74 for the ongoing year’s earnings has been revised 6.9% upward in the past two months.

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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.