The bulk of the Q4 earnings releases are behind us and investors are now interested in betting on stocks based on profit numbers and surprises. However, looking beyond profits and figuring out a company’s cash-flow generating ability can be far more rewarding.
This is because cash indicates a company’s true financial health. It offers the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. In fact, even a company generating profits might face bankruptcy, while meeting obligations, if it is low on cash flow. Nonetheless, a sturdy cash balance can safeguard companies in times of market turbulence.
Therefore, one needs to consider its net cash flow figure in order to effectively find out a company’s resilience and efficiency in generating 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 five of the 14 stocks that qualified the screening:
SYNNEX Corporation SNX, a leading business process services company, offers a full range of distribution, logistics and integration services for the technology industry, as well as outsourced services focused on customer engagement to a wide array of enterprises. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for fiscal 2020 earnings has moved up 5.8% to $13.97 in the past 60 days.
Forterra Inc. FRTA is engaged in manufacturing and sale of pipe and precast products in the United States and Canada, and Mexico. It has a VGM Score of A. The Zacks Consensus Estimate for the current-year earnings improved significantly to 58 cents from 24 cents over the past 60 days.
Everi Holdings Inc. EVRI supplies imaginative entertainment and trusted technology solutions for the casino, interactive, and gaming industry. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for the ongoing-year earnings has been revised 1.8% upward to 58 cents in two months’ time.
Great Lakes Dredge & Dock Corp. GLDD provides dredging services in the United States and internationally. It has a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings of 86 cents indicates a 7.5% upward movement over the past 60 days.
Anhui Conch Cement Company Limited AHCHY, together with its subsidiaries, manufactures and sells clinkers and cement products under the CONCH brand in the People's Republic of China and internationally. It also provides construction and installation services for industrial purposes; logistic and loading services; and mining and related services. The stock has a VGM Score of B. The Zacks Consensus Estimate for this year’s earnings moved 19.2% north to $4.72 in 60 days’ time.
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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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Great Lakes Dredge & Dock Corporation (GLDD) : Free Stock Analysis Report
SYNNEX Corporation (SNX) : Free Stock Analysis Report
Anhui Conch Cement Co. (AHCHY) : Free Stock Analysis Report
Everi Holdings Inc. (EVRI) : Free Stock Analysis Report
FORTERRA INC (FRTA) : Free Stock Analysis Report
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