Bet on These 4 High-Flying Stocks With Increasing Cash Flows
Investors mostly flock to companies that earn profits, but even a profitable business can succumb to failure if its cash flow is uneven and, eventually, file for bankruptcy. However, one can effectively judge a company’s resilience by looking at its efficiency in generating cash flow. This is because cash not only shields it from any market mayhem, but also indicates that its profits are being channeled in the right direction.
In this regard, stocks like Modine Manufacturing Company MOD, Arcos Dorados Holdings Inc. ARCO, Karat Packaging Inc. KRT and LSI Industries Inc. LYTS are worth buying.
In fact, if achieving profit is a company’s goal, then having a healthy cash flow is highly essential for its existence, development and success. This is because cash gives a company more flexibility with respect to business decisions and potential investments, as well as the fuel to run its growth engine. Cash, in fact, indicates a company’s true financial health. This holds more relevance in the current context amid uncertainties in the global economy, market disruptions and dislocations, as well as 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, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the 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 industry categories.
Here are our four picks out of the 17 stocks that qualified the screening:
Modine Manufacturing operates primarily in a single industry consisting of the manufacturing and selling of heat transfer equipment. These include heat exchangers for cooling all types of engines, transmissions, auxiliary hydraulic equipment, air conditioning components used in cars, trucks, farm and construction machinery and equipment, and heating and cooling equipment for residential and commercial building heating, ventilating, air conditioning and refrigeration equipment.
The Zacks Consensus Estimate for Modine Manufacturing’s fiscal 2024 earnings has moved 24.1% north in the past two months to $2.88 per share. MOD has a VGM Score of B.
Arcos Dorados operates as a franchisee of McDonald's, with its operations divided in Brazil, the North Latin America division, South Latin America and the Caribbean division. It also runs quick-service restaurants in Latin America and the Caribbean.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 earnings per share has been revised 2.6% upward to 78 cents in the past two months. ARCO has a VGM Score of A.
Karat Packaging is a specialty distributor and manufacturer of disposable foodservice products and related items. Its products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. The company also offers customized solutions, including product development and design, printing, and logistic services.
The Zacks Consensus Estimate for Karat Packaging’s current-year earnings has moved up nearly 28% to $1.83 per share over the past two months. KRT has a VGM Score of A.
LSI Industries is an Image Solutions company that combines integrated design, manufacturing, & technology to supply its own high-quality lighting fixtures and graphics elements for applications in the retail, specialty niche, and commercial markets.
The Zacks Consensus Estimate for LSI Industries’ fiscal 2024 earnings has moved up by 19.1% to $1.12 per share in the past two months. LYTS has a VGM Score of A.
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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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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
LSI Industries Inc. (LYTS) : Free Stock Analysis Report
Karat Packaging Inc. (KRT) : Free Stock Analysis Report
