We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Forget Profit, Bet on 5 Stocks with Increasing Cash Flows
Read MoreHide Full Article
Investing in stocks with high profits and solid earnings surprises appears trendy in this final stretch of the current reporting cycle. But looking beyond profits and evaluating a company’s cash position is far more rewarding. Because even though profit is a company’s goal, cash is its lifeblood and measure of resiliency.
In fact, even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. But a healthy cash position indicates that profits are efficiently channeled to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
And to find out this efficiency, one needs to consider a company’s net cash flow. While cash moves in and out of any business, it is net cash flow that indicates how much money a company is actually generating.
Experiencing a positive cash flow denotes an increase in the company’s liquid assets. This provides 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, incurring negative cash flow indicates a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
Yet, positive cash flow alone is not sufficient to predict a company’s future growth. A company can consistently grow only when this positive cash flow is rising. Because, increasing cash flow indicates management’s efficiency in regulating its cash movements, less dependency on outside financing for running its business and finally its improving fundamentals.
Therefore, while picking stocks, look beyond profits and select companies with dependable and increasing cash flows.
Screening Parameters:
To find out 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.
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 screens out the 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 five of seven stocks that made it through the screen:
Hallador Energy Company , through its wholly owned subsidiary, Sunrise Coal, LLC, is engaged in the production of coal in the Illinois Basin for the electric power generation industry. The company is headquartered in Denver, CO and has a VGM score of “A”.
TDK Corporation (TTDKY - Free Report) is a Tokyo-based manufacturer and seller of electronic components. The company has a VGM score of “A”.
KT Corp. (KT - Free Report) , headquartered in Seongnam, South Korea, provides telecommunication services. Its services include mobile telecommunications services, telephone services, fixed-line and VoIP telephone services. The company also provides interconnection services to other telecommunications companies, broadband Internet access services and other Internet-related services. It also offers information technology and network services, including consulting, designing, building, and maintaining of systems and communication networks. The company has a VGM score of “A”.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of “B”, is a leading manufacturer, processor and distributor of metals and other engineered materials for building products, vehicular and other industrial markets. The company is headquartered in Buffalo, NY. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 74.53%.
Tokyo Electron Limited (TOELY - Free Report) , with a VGM score of “B”, together with its subsidiaries, is engaged in the development, manufacturing and selling of semiconductor and flat panel display production equipment.
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 backtesting 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Forget Profit, Bet on 5 Stocks with Increasing Cash Flows
Investing in stocks with high profits and solid earnings surprises appears trendy in this final stretch of the current reporting cycle. But looking beyond profits and evaluating a company’s cash position is far more rewarding. Because even though profit is a company’s goal, cash is its lifeblood and measure of resiliency.
In fact, even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. But a healthy cash position indicates that profits are efficiently channeled to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.
And to find out this efficiency, one needs to consider a company’s net cash flow. While cash moves in and out of any business, it is net cash flow that indicates how much money a company is actually generating.
Experiencing a positive cash flow denotes an increase in the company’s liquid assets. This provides 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, incurring negative cash flow indicates a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
Yet, positive cash flow alone is not sufficient to predict a company’s future growth. A company can consistently grow only when this positive cash flow is rising. Because, increasing cash flow indicates management’s efficiency in regulating its cash movements, less dependency on outside financing for running its business and finally its improving fundamentals.
Therefore, while picking stocks, look beyond profits and select companies with dependable and increasing cash flows.
Screening Parameters:
To find out 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.
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 screens out the 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 five of seven stocks that made it through the screen:
Hallador Energy Company , through its wholly owned subsidiary, Sunrise Coal, LLC, is engaged in the production of coal in the Illinois Basin for the electric power generation industry. The company is headquartered in Denver, CO and has a VGM score of “A”.
TDK Corporation (TTDKY - Free Report) is a Tokyo-based manufacturer and seller of electronic components. The company has a VGM score of “A”.
KT Corp. (KT - Free Report) , headquartered in Seongnam, South Korea, provides telecommunication services. Its services include mobile telecommunications services, telephone services, fixed-line and VoIP telephone services. The company also provides interconnection services to other telecommunications companies, broadband Internet access services and other Internet-related services. It also offers information technology and network services, including consulting, designing, building, and maintaining of systems and communication networks. The company has a VGM score of “A”.
Gibraltar Industries, Inc. (ROCK - Free Report) , with a VGM score of “B”, is a leading manufacturer, processor and distributor of metals and other engineered materials for building products, vehicular and other industrial markets. The company is headquartered in Buffalo, NY. With a decent earnings surprise history, the company remains a solid pick. It exceeded estimates in each of the past four quarters, with an average surprise of 74.53%.
Tokyo Electron Limited (TOELY - Free Report) , with a VGM score of “B”, together with its subsidiaries, is engaged in the development, manufacturing and selling of semiconductor and flat panel display production equipment.
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 backtesting 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »