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Buy These 4 Stocks With Rising Cash Flows to Scoop Up Big Gains
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In the final leg of the ongoing reporting cycle, it might seem appropriate to lay a wager on stocks based on profit numbers and earnings surprises. However, looking beyond profits and evaluating a company’s cash position can be far more rewarding. This is because even though profit is a company’s goal, cash is its lifeblood, measure of resiliency and indicator of true financial health.
Even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. Nonetheless, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
Analyzing a company’s cash-generating efficiency holds more relevance in the current context as the coronavirus pandemic has given rise to uncertainties in the global economy, market disruptions and dislocations, and 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 10 stocks that qualified the screening:
Internet Initiative Japan, Inc. (IIJIY - Free Report) : This company offers a comprehensive range of Internet access and other network services mainly to enterprise customers and also to other Internet service providers in Japan. The stock currently has a VGM Score of A. The Zacks Consensus Estimate for earnings of the fiscal year ending March 2022 moved 23.8% north from $1.01 to $1.25 in a month’s time.
Orient Overseas International Ltd. (OROVY - Free Report) : Wanchai, Hong Kong-based Orient Overseas (International) Limited, through its subsidiaries, primarily offers container transport and logistics services, ports and terminals, and property investment. It also provides freight management services, extensive domestic distribution services and supply-chain management.The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings has moved up 71.4% over the past two months.
Piper Sandler Companies (PIPR - Free Report) : This company is a focused securities firm dedicated to delivering superior financial advice, investment products and transaction execution within selected sectors of the financial services marketplace. The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for current-year earnings has been revised 32.5% upward to $17.09 in 30 days’ time.
Grindrod Shipping Holdings Ltd. (GRIN - Free Report) : It is engaged in the ownership and operation of a diversified fleet of owned and long-term and short-term chartered-in drybulk vessels. The stock currently carries a VGM Score of B. The Zacks Consensus Estimate for ongoing-year earnings has moved 10.9% north to $3.45 in the last 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 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.
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.
Image: Bigstock
Buy These 4 Stocks With Rising Cash Flows to Scoop Up Big Gains
In the final leg of the ongoing reporting cycle, it might seem appropriate to lay a wager on stocks based on profit numbers and earnings surprises. However, looking beyond profits and evaluating a company’s cash position can be far more rewarding. This is because even though profit is a company’s goal, cash is its lifeblood, measure of resiliency and indicator of true financial health.
Even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. Nonetheless, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
Analyzing a company’s cash-generating efficiency holds more relevance in the current context as the coronavirus pandemic has given rise to uncertainties in the global economy, market disruptions and dislocations, and 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 10 stocks that qualified the screening:
Internet Initiative Japan, Inc. (IIJIY - Free Report) : This company offers a comprehensive range of Internet access and other network services mainly to enterprise customers and also to other Internet service providers in Japan. The stock currently has a VGM Score of A. The Zacks Consensus Estimate for earnings of the fiscal year ending March 2022 moved 23.8% north from $1.01 to $1.25 in a month’s time.
Orient Overseas International Ltd. (OROVY - Free Report) : Wanchai, Hong Kong-based Orient Overseas (International) Limited, through its subsidiaries, primarily offers container transport and logistics services, ports and terminals, and property investment. It also provides freight management services, extensive domestic distribution services and supply-chain management.The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings has moved up 71.4% over the past two months.
Piper Sandler Companies (PIPR - Free Report) : This company is a focused securities firm dedicated to delivering superior financial advice, investment products and transaction execution within selected sectors of the financial services marketplace. The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for current-year earnings has been revised 32.5% upward to $17.09 in 30 days’ time.
Grindrod Shipping Holdings Ltd. (GRIN - Free Report) : It is engaged in the ownership and operation of a diversified fleet of owned and long-term and short-term chartered-in drybulk vessels. The stock currently carries a VGM Score of B. The Zacks Consensus Estimate for ongoing-year earnings has moved 10.9% north to $3.45 in the last 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 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.