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Forget Profit, Bet on These 4 Stocks With Rising Cash Flows
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It might seem appropriate to lay a wager on stocks based on profit numbers and earnings surprises in this stretch of the current reporting cycle. However, betting on stocks with a healthy cash level can be far more rewarding because although profit is a company’s goal, cash is its lifeblood for existence and a measure of resiliency. This has become all the more important amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic.
Even a profit-making company can face a dearth of cash flow if its profits are not channelized in the right direction and finally end up filing for bankruptcy. However, a company with a healthy cash level not only enjoys the flexibility to make decisions, chase potential investments and run its growth engine but also weathers any market mayhem.
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 13 stocks that qualified the screening:
Star Bulk Carriers is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector.
The Zacks Consensus Estimate of $7.57 per share for Star Bulk Carriers’ current-year earnings has moved 10.2% in the past month. SBLK has a VGM Score of B.
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 $26.86 from $19.18 in the past week. WIRE has a VGM Score of A.
StoneX Group is a financial services organization that provides execution, risk management and advisory services, market intelligence, and clearing services across multiple asset classes and markets around the world.
The Zacks Consensus Estimate for StoneX Group’s fiscal 2022 earnings has been revised 6.2% upward to $8.45 in the past month. SNEX has a VGM Score of A.
Franklin Covey is an international learning and performance solutions company dedicated to increasing the effectiveness of individuals and organizations.
The Zacks Consensus Estimate for FC’s fiscal 2022 earnings has been revised upward by 34 cents to $1.21 per share in the past two months. FC has a VGM Score of B.
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
Forget Profit, Bet on These 4 Stocks With Rising Cash Flows
It might seem appropriate to lay a wager on stocks based on profit numbers and earnings surprises in this stretch of the current reporting cycle. However, betting on stocks with a healthy cash level can be far more rewarding because although profit is a company’s goal, cash is its lifeblood for existence and a measure of resiliency. This has become all the more important amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic.
In this regard, stocks like Star Bulk Carriers Corp. (SBLK - Free Report) , Encore Wire Corporation (WIRE - Free Report) , StoneX Group Inc. (SNEX - Free Report) and Franklin Covey Co. (FC - Free Report) are worth buying.
Even a profit-making company can face a dearth of cash flow if its profits are not channelized in the right direction and finally end up filing for bankruptcy. However, a company with a healthy cash level not only enjoys the flexibility to make decisions, chase potential investments and run its growth engine but also weathers any market mayhem.
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 13 stocks that qualified the screening:
Star Bulk Carriers is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector.
The Zacks Consensus Estimate of $7.57 per share for Star Bulk Carriers’ current-year earnings has moved 10.2% in the past month. SBLK has a VGM Score of B.
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 $26.86 from $19.18 in the past week. WIRE has a VGM Score of A.
StoneX Group is a financial services organization that provides execution, risk management and advisory services, market intelligence, and clearing services across multiple asset classes and markets around the world.
The Zacks Consensus Estimate for StoneX Group’s fiscal 2022 earnings has been revised 6.2% upward to $8.45 in the past month. SNEX has a VGM Score of A.
Franklin Covey is an international learning and performance solutions company dedicated to increasing the effectiveness of individuals and organizations.
The Zacks Consensus Estimate for FC’s fiscal 2022 earnings has been revised upward by 34 cents to $1.21 per share in the past two months. FC has a VGM Score of B.
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.