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4 Buy-Rated Stocks to Pick on Impressive Cash Flow Growth

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If achieving profit is a company’s goal, then having a healthy cash flow is highly essential for its existence, development and success. This is because cash offers the flexibility to make decisions, the means to make investments and the fuel to run a company’s growth engine. Thus, it can safely be called the lifeblood of any business.

In this regard, stocks like PDC Energy, Inc. , Encore Wire Corporation (WIRE - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and Universal Logistics Holdings, Inc. (ULH - Free Report) are worth buying.

Investors often flock to companies that earn profits. However, a profitable business can also succumb to failure if its cash flow is uneven and eventually has to file for bankruptcy. Therefore, one must go beyond profit numbers for prudent investment and look at a company’s efficiency in generating cash flows, as cash shields from market mayhem and indicates that profits are being channelized in the right direction.

Moreover, analyzing a company’s cash-generating efficiency holds more relevance in the current context with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic.

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, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the 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 industry categories.

Here are our four picks out of the 17 stocks that qualified the screening:

PDC Energy, headquartered in Denver, CO, is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.

The Zacks Consensus Estimate for PDC Energy’s 2022 earnings has moved 9.6% north to $17.84 over the past month. PDCE currently carries a VGM Score of A.

Encore Wire is a low-cost manufacturer of copper electrical building wire and cable. The company is a significant supplier of residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings.

The Zacks Consensus Estimate for Encore Wire’s 2022 earnings has been revised upward to $19.18 from $10.74 in a month. WIRE has a VGM Score of A.

Tecnoglass is a leading manufacturer of architectural glass, windows and associated aluminum products serving the global residential and commercial end markets.

The Zacks Consensus Estimate for Tecnoglass’s 2022 earnings has been revised 5.7% upward to $2.24 in a month. TGLS has a VGM Score of A.

Universal Logistics is a provider of customized transportation and logistics solutions. It offers services across its entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.

The Zacks Consensus Estimate of $4.55 for Universal Logistics’ 2022 earnings has moved 40% north in the past 30 days. ULH has a VGM Score of A.

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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.


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Encore Wire Corporation (WIRE) - free report >>

Tecnoglass Inc. (TGLS) - free report >>

Universal Logistics Holdings, Inc. (ULH) - free report >>

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