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Look Beyond Earnings: 3 Stocks With Increasing Cash Flows
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We are in one of the busiest weeks of the current-reporting cycle, and crunching profit numbers and evaluating surprises might seem appropriate right now for investors. However, looking beyond the profit numbers and figuring out a company’s efficiency in generating cash flows can be far more rewarding.
This is because even a profit-making company can face cash trouble and end up being bankrupt while meeting its obligations. But a company with solid cash flow can endure any market mayhem besides enjoying flexibility in decision making, chasing potential investments and fueling its growth engine. In fact, cash is indispensable factor for any company. It gives strength and vitality to a company and is the key to its existence, development and success.
To find out the efficiency of a company, one needs to consider its net cash flow. While, in any business, cash moves in and out, it is net cash flow that explains how much money the company is actually generating.
A positive cash flow indicates an increase in the company’s liquid assets, which provide 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, negative cash flow indicates a decline in the company’s liquidity and in turn lowers its flexibility to support these moves.
However, positive cash flow alone is not sufficient to predict a company’s growth. A company can competently grow only when this positive cash flow is rising, because this improvement indicates management’s efficiency in regulating its cash movements and lesser dependency on external financing sources for running its business.
So, while picking stocks, look beyond profits and select companies with dependable and increasing 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 individual industry categories.
Here are three out of four stocks that qualified the screening:
The Woodlands, TX-based Huntsman Corporation (HUN - Free Report) , is a global manufacturer and marketer of differentiated and specialty chemicals for various industrial and consumer applications. The company has a VGM Score of A.
In the trailing four quarters, the stock delivered an average beat of 26.4%. The Zacks Consensus Estimate for 2017 earnings has moved up 2.3% in two months’ time.
Nova Measuring Instruments Ltd. (NVMI - Free Report) is an Israel-based company that develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. The company has a VGM Score of B.
The company is a steady performer, having beaten the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 21.7%. Moreover, the Zacks Consensus Estimate for 2017 earnings has climbed 9.9% in three months’ time.
Modine Manufacturing Company (MOD - Free Report) operates primarily in a single industry consisting of the manufacture and sale of heat transfer equipment. The company is headquartered in Racine, WI, and has operations in North America, South America, Europe, Asia and Africa. It has a VGM Score of B.
The stock has experienced solid estimate revisions. In fact, the Zacks Consensus Estimate for fiscal 2018 earnings has increased 1.4% in a month’s time.
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.
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 »
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Look Beyond Earnings: 3 Stocks With Increasing Cash Flows
We are in one of the busiest weeks of the current-reporting cycle, and crunching profit numbers and evaluating surprises might seem appropriate right now for investors. However, looking beyond the profit numbers and figuring out a company’s efficiency in generating cash flows can be far more rewarding.
This is because even a profit-making company can face cash trouble and end up being bankrupt while meeting its obligations. But a company with solid cash flow can endure any market mayhem besides enjoying flexibility in decision making, chasing potential investments and fueling its growth engine. In fact, cash is indispensable factor for any company. It gives strength and vitality to a company and is the key to its existence, development and success.
To find out the efficiency of a company, one needs to consider its net cash flow. While, in any business, cash moves in and out, it is net cash flow that explains how much money the company is actually generating.
A positive cash flow indicates an increase in the company’s liquid assets, which provide 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, negative cash flow indicates a decline in the company’s liquidity and in turn lowers its flexibility to support these moves.
However, positive cash flow alone is not sufficient to predict a company’s growth. A company can competently grow only when this positive cash flow is rising, because this improvement indicates management’s efficiency in regulating its cash movements and lesser dependency on external financing sources for running its business.
So, while picking stocks, look beyond profits and select companies with dependable and increasing 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 individual industry categories.
Here are three out of four stocks that qualified the screening:
The Woodlands, TX-based Huntsman Corporation (HUN - Free Report) , is a global manufacturer and marketer of differentiated and specialty chemicals for various industrial and consumer applications. The company has a VGM Score of A.
In the trailing four quarters, the stock delivered an average beat of 26.4%. The Zacks Consensus Estimate for 2017 earnings has moved up 2.3% in two months’ time.
Nova Measuring Instruments Ltd. (NVMI - Free Report) is an Israel-based company that develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. The company has a VGM Score of B.
The company is a steady performer, having beaten the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 21.7%. Moreover, the Zacks Consensus Estimate for 2017 earnings has climbed 9.9% in three months’ time.
Modine Manufacturing Company (MOD - Free Report) operates primarily in a single industry consisting of the manufacture and sale of heat transfer equipment. The company is headquartered in Racine, WI, and has operations in North America, South America, Europe, Asia and Africa. It has a VGM Score of B.
The stock has experienced solid estimate revisions. In fact, the Zacks Consensus Estimate for fiscal 2018 earnings has increased 1.4% in a month’s time.
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.
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 »