The major U.S. bourses are enjoying a strong and steady rally with the possibility of the signing of Sino-US phase-one trade deal in early January 2020 considerably lifting investor optimism. The broader market momentum is unlikely to slow down, at least in early 2020, with resilient consumer spending, upbeat job data and prevailing low interest rates.
Amid these, laying a wager on stocks based on profit numbers appears a good option. But looking beyond profits and figuring out a company’s efficiency in generating cash flows can be far more rewarding. This is because cash is the most indispensable factor for any company. It gives strength and vitality, and is the key for its existence, development and success. 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 five out of the 11 stocks that qualified the screening:
Shoe Carnival, Inc. (SCVL - Free Report) 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 past 60 days.
Irvine, CA -based Tilly's Inc. (TLYS - Free Report) 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 has moved 6% north to 88 cents over the past 30 days.
Chicago-based Enova International Inc. (ENVA - Free Report) 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 7.3% upward to $3.97 in the past 60 days.
SP Plus Corporation (SP - Free Report) , 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 A. The Zacks Consensus Estimate for 2019 earnings has been revised around 1.5% upward to $2.79 in the past 60 days.
Gray Television, Inc. (GTN - Free Report) is a communications company headquartered in Atlanta, GA. It currently owns and operates television stations as well as digital assets in markets across the United States. The company has a VGM Score of B. Also, the Zacks Consensus Estimate for 2019 earnings has moved 20.3% north to 95 cents in the past 30 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.