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Look Beyond Earnings, Bet on 4 Stocks With Rising Cash Flows
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Investors can be lured by profits and earnings surprises in the ongoing reporting cycle. However, during this earnings season and beyond, betting on stocks with a healthy cash level can be far more rewarding because cash is the lifeblood for a company’s existence, a measure of resiliency, and a revelation of its true financial health.
In fact, even after reaping profits, a company can face a dearth of cash flow and be bankrupt, while meeting its obligations if its profits are not channelized in the right direction. However, a company with adequate cash flows can effectively tide over any market mayhem besides enjoying flexibility in decision making and chasing potential investments.
Analyzing a company’s cash-generating efficiency has indeed become more relevant amid the global health crisis that has given rise to uncertainties in the world economy, market disruptions and dislocations, as well as liquidity concerns.Therefore, looking at a company’s ability to produce cash is important not only in terms of protecting your money but also for multiplying it.
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 11 stocks that qualified the screening:
Academy Sports and Outdoors, Inc. (ASO - Free Report) provides sporting goods and outdoor recreation retailers, principally in the United States. The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up 13.6% to $6.42 in a month’s time.
Citi Trends, Inc. (CTRN - Free Report) is a value-priced retailer of urban fashion apparel and accessories for the entire family. The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved 30% north to $6.50 in the last two months.
Titan Machinery Inc. (TITN - Free Report) owns and operates a network of full-service agricultural and construction equipment dealer locations in North America and Europe. The stock currently carries a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved 9.2% north to $2.13 over the past month.
Grindrod Shipping Holdings Ltd. (GRIN - Free Report) is engaged in the ownership and operation of a diversified fleet of owned and long- and short-term chartered-in drybulk vessels. The stock currently carries a VGM Score of B. The Zacks Consensus Estimate for the ongoing-year earnings has moved 31% north to $4.52 in two months’ time.
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.
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Look Beyond Earnings, Bet on 4 Stocks With Rising Cash Flows
Investors can be lured by profits and earnings surprises in the ongoing reporting cycle. However, during this earnings season and beyond, betting on stocks with a healthy cash level can be far more rewarding because cash is the lifeblood for a company’s existence, a measure of resiliency, and a revelation of its true financial health.
In fact, even after reaping profits, a company can face a dearth of cash flow and be bankrupt, while meeting its obligations if its profits are not channelized in the right direction. However, a company with adequate cash flows can effectively tide over any market mayhem besides enjoying flexibility in decision making and chasing potential investments.
Analyzing a company’s cash-generating efficiency has indeed become more relevant amid the global health crisis that has given rise to uncertainties in the world economy, market disruptions and dislocations, as well as liquidity concerns.Therefore, looking at a company’s ability to produce cash is important not only in terms of protecting your money but also for multiplying it.
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 11 stocks that qualified the screening:
Academy Sports and Outdoors, Inc. (ASO - Free Report) provides sporting goods and outdoor recreation retailers, principally in the United States. The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved up 13.6% to $6.42 in a month’s time.
Citi Trends, Inc. (CTRN - Free Report) is a value-priced retailer of urban fashion apparel and accessories for the entire family. The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved 30% north to $6.50 in the last two months.
Titan Machinery Inc. (TITN - Free Report) owns and operates a network of full-service agricultural and construction equipment dealer locations in North America and Europe. The stock currently carries a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has moved 9.2% north to $2.13 over the past month.
Grindrod Shipping Holdings Ltd. (GRIN - Free Report) is engaged in the ownership and operation of a diversified fleet of owned and long- and short-term chartered-in drybulk vessels. The stock currently carries a VGM Score of B. The Zacks Consensus Estimate for the ongoing-year earnings has moved 31% north to $4.52 in two months’ time.
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.