Making profits is undoubtedly a company’s primary goal, but having a healthy cash flow is imperative to its existence, development and success. And why not? Even a company generating profits succumbs to failure and faces bankruptcy while meeting obligations if it has a dearth of cash flow. However, one can efficiently tide over any market mayhem if it has the cash to shield it.
In fact, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves. This offers flexibility to make decisions, chase potential investments and fuel its growth engine. It is indeed a true indicator of a company’s financial health and a measure of resiliency.
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 six out of 13 stocks that qualified the screening:
Shoe Carnival, Inc. SCVL is one of the nation's largest family footwear retailers, offering a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national and regional name brands. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for fiscal 2019 earnings has moved up 3.6% to $2.88 in the last 30 days.
Irvine, CA -based Tilly's Inc. TLYS is a specialty retailer in the action sports industry, selling clothing, shoes and accessories. It has a VGM Score of A. The projected long-term growth rate for the company is 11%. Moreover, the Zacks Consensus Estimate for fiscal 2019 moved 6% north to 88 cents over the last 30 days.
Chicago-based Enova International Inc. ENVA is a provider of online financial services. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for current-year earnings has been revised 10.3% upward to $3.97 in the last 60 days.
Schaumburg, IL-based Career Education Corporation is an educational services company committed to providing quality, career-focused learning. The stock has a VGM Score of B. Further, the Zacks Consensus Estimate for 2019 earnings of $1.36 moved up 8.8% over the past two months.
SP Plus Corporation SP, based in Chicago, IL, provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry. The company has a VGM score of B. The Zacks Consensus Estimate for the ongoing-year earnings has been revised around 3% upward to $2.79 in the last 60 days.
Headquartered in Grand Rapids, MI, Universal Forest Products Inc. UFPI — soon to be known as UFP Industries, Inc. — is a holding company with its subsidiaries throughout North America, Europe, Asia and Australia. The company supplies wood, wood composite and other products in retail, industrial and construction market. The stock has a VGM Score of B. The Zacks Consensus Estimate for the ongoing-year earnings moved 1.75% north, over the past two months.
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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.
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