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Look Beyond Profit, Bet on 4 Stocks With Increasing Cash Flows
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Crunching profit numbers and evaluating surprises might appear as a good option in the ongoing reporting cycle. However, these do not ensure that the profits are being efficiently channeled to the reserves for funding growth. This is because even a profit-making company can have a deficiency of cash flow and go bankrupt while meeting its obligations.
Therefore, one must look at a company’s proficiency in generating cash flows before investing in the right stocks. This is because cash is the most indispensable factor for any company. It gives strength and vitality and is the key for its existence, development and success.
In this regard, stocks like Herc Holdings Inc. (HRI - Free Report) , StoneX Group Inc. (SNEX - Free Report) , Veritiv Corporation and Harte Hanks, Inc. (HHS - Free Report) are worth buying.
Analyzing a company’s cash-generating efficiency has indeed become more relevant amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the health crisis.
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 15 stocks that qualified the screening:
Herc Holdings, Inc., through its subsidiary Herc Rentals Inc., operates as an equipment rental supplier mainly in North America. The equipment rental business is supported by ProSolutions.
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved up 1.7% and 3.4%, respectively, in the past three months. Currently, HRI carries 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 2023 earnings has been revised 4.1% upward to $9.07 in the past month. SNEX has a VGM Score of A.
Veritiv Corporation 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.
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved up 1.7% and 4%, respectively, in the past two months. Currently, VRTV carries a VGM Score of B.
Harte Hanks is a data-driven, omnichannel marketing company. The company offers customer data landscape as well as the executional know-how in database build and management, data analytics, data-driven creativity, digital media, direct mail, customer contact, client fulfillment and marketing and product logistics.
The Zacks Consensus Estimate for Harte Hanks’ 2023 earnings has been revised upward by 2.9% over the past two months. HHS has a VGM Score of A.
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 Profit, Bet on 4 Stocks With Increasing Cash Flows
Crunching profit numbers and evaluating surprises might appear as a good option in the ongoing reporting cycle. However, these do not ensure that the profits are being efficiently channeled to the reserves for funding growth. This is because even a profit-making company can have a deficiency of cash flow and go bankrupt while meeting its obligations.
Therefore, one must look at a company’s proficiency in generating cash flows before investing in the right stocks. This is because cash is the most indispensable factor for any company. It gives strength and vitality and is the key for its existence, development and success.
In this regard, stocks like Herc Holdings Inc. (HRI - Free Report) , StoneX Group Inc. (SNEX - Free Report) , Veritiv Corporation and Harte Hanks, Inc. (HHS - Free Report) are worth buying.
Analyzing a company’s cash-generating efficiency has indeed become more relevant amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the health crisis.
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 15 stocks that qualified the screening:
Herc Holdings, Inc., through its subsidiary Herc Rentals Inc., operates as an equipment rental supplier mainly in North America. The equipment rental business is supported by ProSolutions.
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved up 1.7% and 3.4%, respectively, in the past three months. Currently, HRI carries 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 2023 earnings has been revised 4.1% upward to $9.07 in the past month. SNEX has a VGM Score of A.
Veritiv Corporation 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.
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved up 1.7% and 4%, respectively, in the past two months. Currently, VRTV carries a VGM Score of B.
Harte Hanks is a data-driven, omnichannel marketing company. The company offers customer data landscape as well as the executional know-how in database build and management, data analytics, data-driven creativity, digital media, direct mail, customer contact, client fulfillment and marketing and product logistics.
The Zacks Consensus Estimate for Harte Hanks’ 2023 earnings has been revised upward by 2.9% over the past two months. HHS has a VGM Score of A.
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.