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Cash is a true indicator of a company’s financial health. It provides vitality and strength to a company, offers flexibility to make decisions, the means to make potential investments, the fuel to run its growth engine, and can indeed be referred as the lifeblood of any business.
In fact, even a company generating profits might face bankruptcy while meeting obligations if it is low on cash flow. However, a company with sturdy cash balance can effectively tide over any market mayhem.
Moreover, with the coronavirus pandemic wreaking havoc on the global economy, and the resultant market disruption and dislocations being unprecedented with significant impact on liquidity, laying a wager on 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. Meanwhile, 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 12 stocks that qualified the screening:
Great Lakes Dredge & Dock Corp. GLDD offers dredging services in the United States and internationally. It has a VGM Score of A. The Zacks Consensus Estimate of $1.06 per share for the current-year earnings calls for a 23.3% year-over-year increase in 60 days’ time.
Perdoceo Education Corporation PRDO provides educational services. The company offers bachelor's, associate and non-degree programs in information technologies, visual communication and design technologies, business studies and culinary arts. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $1.51 for 2020 earnings has been revised 4.1% upward over the past 60 days.
eXp World Holdings Inc. EXPI provides cloud-based real estate brokerage services, primarily in the United States and Canada. The stock has a VGM Score of B. The Zacks Consensus Estimate of 11 cents for the ongoing-year earnings per share moved up over the last 60 days. Also, the estimate for current-year sales indicates a 32.4% jump, year on year.
Systemax Inc. SYX is a direct marketer of brand name and private label products, including personal desktop computers, notebook computers, computer related products, and industrial products, in North America and Europe. Currently, the stock has a VGM Score of B. The Zacks Consensus Estimate for 2020 earnings has been revised upward by 15.8% to $1.10 in 60 days’ time.
Tutor Perini Corporation TPC 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 B. The Zacks Consensus Estimate of $2.10 for this year’s earnings moved 16.7% north over the past 60 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.
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Systemax Inc. (SYX) : Free Stock Analysis Report
Great Lakes Dredge Dock Corporation (GLDD) : Free Stock Analysis Report
Tutor Perini Corporation (TPC) : Free Stock Analysis Report
Exp World Holdings, Inc. (EXPI) : Free Stock Analysis Report
Career Education Corporation (PRDO) : Free Stock Analysis Report
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