The Q1 reporting cycle is almost over and it is usual for investors to now crunch profit numbers and evaluate surprises of companies. But evaluating a company’s cash level can be far more rewarding.
This is because even a profit-making company can have a dearth of cash flows and struggle to meet its obligations if its profits are not channelized in the right direction to fund future growth. But a company with adequate cash flows can effectively tide over any market mayhem besides enjoying flexibility in decision making and chasing potential investments. In fact, even though profit is a company’s goal, cash is its lifeblood for existence and a measure of resiliency.
To find this efficiency, one needs to consider its net cash flow figure. While in any business cash moves in and out, it is net cash flow that explains how much money the company is actually generating.
If a company is experiencing a positive cash flow then it denotes an increase in its liquid assets, which gives it 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, 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.
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 four out of seven stocks that qualified the screening:
New Albany, OH-based Commercial Vehicle Group Inc. is a supplier of cab-related products for the global commercial vehicle market, including the heavy-duty truck market, the construction and agricultural market and other specialized transportation markets.
The company has a Growth Score of A. Moreover, the stock has seen the Zacks Consensus Estimate for 2018 earnings being revised 11.9% upward in a week’s time.
Netherlands-based Koninklijke DSM N.V. (RDSMY - Free Report) is a global science-based company engaged in health, nutrition and materials. The company has a VGM Score of A.
It also has a long-term expected EPS growth rate of 7.7%. Moreover, the stock has seen the Zacks Consensus Estimate for 2018 earnings being revised 12.5% upward in a month’s time.
Round Rock, TX-based Dell Technologies Inc. is a provider of information technology solutions. The company has a VGM Score of B.
Dell Technologies has a projected long-term growth EPS rate of 9.1%. Moreover, the Zacks Consensus Estimate for fiscal year 2019 earnings has been revised 4.2% north in the past two months, reflecting analysts’ bullish sentiments on the stock.
QuinStreet, Inc. (QNST - Free Report) , based in Foster City, CA, is a provider of online direct marketing and media services. The company has a VGM Score of B.
QuinStreet has a projected long-term EPS growth rate of 25%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings increasing 22.2% 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 »