Cash is the lifeblood of any business. It offers strength, vitality and flexibility to make investment decisions, as well as the fuel to run its growth engine. Moreover, cash shields a company from market turmoil and indicates that profits are being channelized in the right direction.
In fact, one must go beyond profit numbers and look at a company’s efficiency in generating cash flows to invest in the right stocks. This is because even a profit-making company can have a dearth of cash flow and fail in meeting its obligations. However, a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed.
Moreover, with the coronavirus pandemic causing a bloodbath in the global economy, and the resultant market disruption and dislocations being unprecedented with significant impact on liquidity, investing in stocks based on their cash-flow generating efficiency looks all the more prudent.
To figure out this efficiency, one needs to consider a company’s net cash flow. 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 four of the eight stocks that qualified the screening:
Tutor Perini Corporation (TPC - Free Report) is a construction company providing diversified general contracting, construction management, and design-build services to private customers and public agencies worldwide. The stock has a VGM Score of A. The Zacks Consensus Estimate of $2.10 for this year’s earnings moved 16.7% north over the past 30 days.
eXp World Holdings Inc. (EXPI - Free Report) provides cloud-based real estate brokerage services primarily in the United States and Canada. The stock has a VGM Score of A. The Zacks Consensus Estimate for the ongoing-year earnings per share has been revised upward over the last 30 days. Also, the estimate for current-year sales indicates a 32.4% jump, year on year.
KoninklijkeVopak N.V. (VOPKY - Free Report) engages in tank terminal operations and storage of oil. It has a VGM Score of B. The company’s expected earnings growth rate for 2020 is 7.6%. The Zacks Consensus Estimate for ongoing-year earnings has improved 6.3% over the past 60 days.
Elbit Systems Ltd. (ESLT - Free Report) , an Israel-headquartered international technology company,is engaged in a vast array of defense, homeland security and commercial programs throughout the world, operating in areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance among others. It has a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings indicates 12.7% year-over-year growth on revenue increase of 8.8%.
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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.