Crunching profit numbers and evaluating surprises may be a preferred method for scooping up big gains in the impending Q1 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.
This is because even though profit is a company’s goal, cash is the lifeblood for its existence, development and success, and indeed a measure of its resilience. 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 a company’s net cash flow figure. 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 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 five out of the 11 stocks that qualified the screening:
Headquartered in Santurce, Puerto Rico, First BanCorp. (FBP - Free Report) provides a range of financial products and services to retail, commercial and institutional clients. The stock flaunts a VGM Score of A. The company’s projected earnings growth for 2019 is 24.2%. The Zacks Consensus Estimate for its current-year earnings has increased 4.1% in the past seven days.
Israel-based Kamada Ltd. (KMDA - Free Report) develops, produces and markets specialty plasma-derived protein therapeutics. The stock has a VGM Score of B. Further, the Zacks Consensus Estimate for 2019 earnings moved 34.3% north to 47 cents, in the last 60 days.
Baudette, MN-headquartered ANI Pharmaceuticals, Inc. (ANIP - Free Report) develops, manufactures and markets branded and generic prescription pharmaceuticals. The stock has a VGM Score of B. The company’s expected earnings growth for the current year is 17.75%. The Zacks Consensus Estimate for current-year earnings has been revised 1.2% upward, in 60 days’ time.
Vancouver, WA-headquartered Barrett Business Services, Inc. (BBSI - Free Report) offers business management solutions, combining human resource outsourcing and professional management consulting. The stock has a VGM Score of A. The company’s projected earnings growth for 2019 is 8.63%. The Zacks Consensus Estimate for current-year earnings per share climbed 0.6%, over the last 60 days.
Walker & Dunlop, Inc. (WD - Free Report) , based in Bethesda, MD, is a commercial real estate finance company in the United States, offering a broad range of capital solutions for all commercial real estate asset classes, as well as investment sales brokerage services to owners of multifamily properties. The stock has a VGM Score of B. The company’s expected earnings growth for the current year is 7.1%. The Zacks Consensus Estimate for current-year earnings has been revised 4.2% upward in two months’ 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.