Cash is the lifeblood for a company’s existence, development and success. It gives strength and vitality to a company, the flexibility to make decisions, the means to make potential investments, as well as the fuel to run its growth engine, thereby indicating its true financial health.
Investors certainly flock to companies that earn profits, but even a profitable business can succumb to failure if its cash flow is uneven and eventually file for bankruptcy. However, one can effectively judge a company’s resilience by evaluating its power of generating cash flows, as cash not only guards a company from market mayhem, but also indicates that profits are being channelized in the right direction. This has become all the more important as the coronavirus pandemic has resulted in unprecedented uncertainties in the global economy, market disruptions and dislocations, and affected liquidity. 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. This score is also of great assistance in selecting stocks. Importantly, this scoring system helps in picking winning stocks in their individual industry categories. VGM Score of B or better: Here are the four out of the 12 stocks that qualified the screening: Veritiv Corporation ( VRTV Quick Quote VRTV - Free Report) : This company engages in offering North American business-to-business distribution solutions. It provides packaging, print and print management, publishing, supply chain, facility and logistics solutions that span the entire lifecycle of core business operations. Currently, the stock sports a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings has moved up 45.6% over the past week to $6.55. Marubeni Corp. ( MARUY Quick Quote MARUY - Free Report) : Tokyo, Japan-based Marubeni Corporation purchases, distributes, and markets various industrial and consumer goods worldwide. It imports, exports and trades within the Japanese market in food, textiles, materials, pulp and paper, chemicals, energy, metals and mineral resources and transportation machinery. It is also engaged in power projects and infrastructure, plants and industrial machinery, real estate development and construction, finance, logistics and information industries.The stock currently has a VGM Score of A. The Zacks Consensus Estimate for earnings of the fiscal year ending March 2022 moved 6% north in two months’ time. Orient Overseas International Ltd. ( OROVY Quick Quote OROVY - Free Report) : This Wanchai, Hong Kong-based company, 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. Mueller Industries, Inc. ( MLI Quick Quote MLI - Free Report) : This company is a leading manufacturer of copper tube and fittings; brass and copper alloy rod, bar and shapes; aluminum and brass forgings; aluminum and copper impact extrusions; plastic fittings and valves; refrigeration valves and fittings; and fabricated tubular products. At present, the stock has a VGM Score of B. The Zacks Consensus Estimate of $6.25 for current-year earnings moved 52.4% north in 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 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.