Crunching profit numbers and evaluating surprises may be a preferred method for scooping up big gains in the impending Q2 earnings season. But looking beyond profits and assessing a company’s cash position can be far more rewarding because that indicates its true financial health.
In fact, even a profitable business can fail if its cash flow is uneven and eventually file for bankruptcy. But a company with a healthy cash position has the capability to effectively tide over any market mayhem and still be on the growth curve, besides enjoying flexibility to make decisions, chase potential investments and run its growth engine.
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 eight stocks that qualified the screening:
Hitachi, Ltd. (HTHIY - Free Report) , headquartered in Tokyo, is one of the world's leading global electronics companies. They manufacture and market a wide range of products, including computers, semiconductors, consumer products and power and industrial equipment. The company has a VGM Score of A.
Hitachi has a projected long-term EPS growth rate of 13%. The Zacks Consensus Estimate for fiscal year 2019 earnings has improved by 8.3% in two months’ time.
Everi Holdings Inc. (EVRI - Free Report) , headquartered in Las Vegas, supplies technology solutions to the casino gaming industry. The company has a VGM Score of A. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for 2018 earnings increasing to 4 cents per share from 2 cents in the last 60 days.
Panasonic Corp. (PCRFY - Free Report) , headquartered in Japan, is engaged in the development and manufacture of electronic products for a wide range of consumer, business, and industrial needs. The company has a VGM Score of A.
Panasonic has a projected long-term EPS growth rate of 11.3%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2019 earnings moving 2.1% north in three months’ time.
Turtle Beach Corp. (HEAR - Free Report) is a San Diego, CA-based audio technology company that designs audio products for consumer, commercial and healthcare markets. The company has a VGM Score of A. Moreover, the Zacks Consensus Estimate for 2018 earnings increased to 97 cents per share from 37 cents in the past 90 days.
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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.
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