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5 Stocks to Buy With Increasing Cash Flows Ahead of Q3 Earnings

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Moumita C. Chattopadhyay
·5 min read
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Crunching profit numbers and evaluating surprises might be a popular method for scooping big gains in the third-quarter earnings season. However, looking beyond profit and assessing a company’s cash position, which reveals its true financial health, can be far more rewarding.

Even a profitable business can fail, if its cash flow is uneven, and eventually file for bankruptcy. However, a company can navigate any market mayhem and still be on its growth curve if it has sufficient cash flow. This is because cash gives a company the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. It indeed holds the key for its existence, development and success.

Moreover, analyzing a company’s generating efficiency cash holds more relevance in the current context as the coronavirus pandemic is giving rise to uncertainties in the global economy, market disruptions and dislocations, and liquidity concerns.

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.

Screening Parameters:

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 the five stocks that qualified the screening:

PEUGEOT SA PUGOY manufactures and sells passenger cars and light commercial vehicles under the Peugeot, Citroën and DS brands; and automotive equipment, including interior systems, automotive seating, automotive exteriors and emission-control technologies. It also offers retail financing to car customers and wholesale financing to dealer networks. Currently, the stock has a VGM Score of A.The Zacks Consensus Estimate for its ongoing-year earnings has moved up 26.6% in the past month to $3.24.

SYNNEX Corporation SNX is a leading business process services company. The company provides a comprehensive range of distribution, logistics and integration services for the technology industry and outsourced services focused on customer engagement to a broad range of enterprises. The stock currently has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has been revised 14% upward to $12.25 over the past 30 days.

Aviat Networks, Inc. AVNW is a global supplier of wireless network solutions and network management software, backed by a suite of professional services and support. At present, the stock has a VGM Score of B.The Zacks Consensus Estimate of $2.50 for fiscal 2021 earnings moved 56.3% north over the past 60 days.

Polymetal International plc. AUCOY is a metal producer primarily in Russia, Kazakhstan, and Armenia. It principally explores for gold and silver. Polymetal International plc is headquartered in Saint Petersburg, the Russia Federation. The stock currently has a VGM Score of B. The Zacks Consensus Estimate of $2.28 for 2020 earnings has moved 9.6% north over the past 30 days.

G4S plc GFSZY operates as an integrated security company specializing in the provision of security products, services and solutions. It has operations in North America, Europe, Africa, Middle East, Asia/Pacific and Latin America. G4S Plc is based in the U.K. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 10.7% in the past two months to 83 cents.

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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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Aviat Networks, Inc. (AVNW) : Free Stock Analysis Report
 
SYNNEX Corporation (SNX) : Free Stock Analysis Report
 
G4S PLC (GFSZY) : Free Stock Analysis Report
 
PEUGEOT SA (PUGOY) : Free Stock Analysis Report
 
Polymetal International PLC Sponsored ADR (AUCOY) : Free Stock Analysis Report
 
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