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Look Beyond Profit, Bet on 4 Stocks With Swelling Cash Flows
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Investors mostly flock to companies that earn profits. However, even a profitable business can succumb to failure if its cash flow is uneven and it can eventually file for bankruptcy. One can effectively judge a company’s resilience by looking at its efficiency in generating cash flows. This is because cash not only shields it from market mayhem but also indicates that profits are being channelized in the right direction.
In this regard, stocks like ASE Technology Holding Co., Ltd. (ASX - Free Report) , Weatherford International plc (WFRD - Free Report) , Encore Wire Corporation (WIRE - Free Report) and Tecnoglass Inc. (TGLS - Free Report) are worth buying.
If achieving profit is a company’s goal, then having a healthy cash flow is essential for its existence, development and success. This is because cash gives a company more flexibility with respect to business decisions and potential investments, as well as the fuel to run its growth engine. Cash indicates a company’s true financial health.
Analyzing a company’s cash-generating efficiency has 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 17 stocks that qualified the screening:
ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. The company develops and offers complete turnkey solutions covering front-end engineering testing, wafer probing and final testing, as well as IC packaging, materials and electronic manufacturing services.
The Zacks Consensus Estimate for ASE Technology’s 2023 earnings has been revised 5.1% upward over the past two months. Currently, ASX has a VGM Score of A.
Weatherford International provides oil field services and equipment. The company offers drilling solutions, gas well unloading, restoration and other related activities.
The Zacks Consensus Estimate for 2023 earnings has improved 44.6% over the past two months. Currently, WFRD 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 2023 earnings has been revised 28.1% upward in the past two months. 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’ 2023 earnings has been revised 10.7% upward in the past month. TGLS 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.
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Look Beyond Profit, Bet on 4 Stocks With Swelling Cash Flows
Investors mostly flock to companies that earn profits. However, even a profitable business can succumb to failure if its cash flow is uneven and it can eventually file for bankruptcy. One can effectively judge a company’s resilience by looking at its efficiency in generating cash flows. This is because cash not only shields it from market mayhem but also indicates that profits are being channelized in the right direction.
In this regard, stocks like ASE Technology Holding Co., Ltd. (ASX - Free Report) , Weatherford International plc (WFRD - Free Report) , Encore Wire Corporation (WIRE - Free Report) and Tecnoglass Inc. (TGLS - Free Report) are worth buying.
If achieving profit is a company’s goal, then having a healthy cash flow is essential for its existence, development and success. This is because cash gives a company more flexibility with respect to business decisions and potential investments, as well as the fuel to run its growth engine. Cash indicates a company’s true financial health.
Analyzing a company’s cash-generating efficiency has 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 17 stocks that qualified the screening:
ASE Technology is a provider of semiconductor manufacturing services in assembly and testing. The company develops and offers complete turnkey solutions covering front-end engineering testing, wafer probing and final testing, as well as IC packaging, materials and electronic manufacturing services.
The Zacks Consensus Estimate for ASE Technology’s 2023 earnings has been revised 5.1% upward over the past two months. Currently, ASX has a VGM Score of A.
Weatherford International provides oil field services and equipment. The company offers drilling solutions, gas well unloading, restoration and other related activities.
The Zacks Consensus Estimate for 2023 earnings has improved 44.6% over the past two months. Currently, WFRD 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 2023 earnings has been revised 28.1% upward in the past two months. 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’ 2023 earnings has been revised 10.7% upward in the past month. TGLS 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.