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Bet on 4 Leading Stocks With Increasing Cash Flows

Zacks Equity Research
Texas Capital (TCBI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Achieving profit is no doubt a company’s goal, but having a healthy cash flow is imperative to its existence, development and success. And why not? Even a company generating profits succumbs to failure and faces bankruptcy while meeting its obligations if it has a dearth of cash flow. But one can efficiently tide over any market mayhem if it has the cash to shield it.

Indeed, cash is the lifeblood of any business and 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.

To understand this efficiency, one needs to consider a company’s net cash flow. In any business, cash moves in and out. It is net cash flow that explains how much money the company is actually making. Experiencing a positive cash flow denotes an increase in the company’s liquid assets. This provides 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.

As a result, while picking stocks, go beyond profits and make sure to look for companies with dependable and increasing 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 four out of nine stocks that qualified the screening:

SORL Auto Parts, Inc. SORL, headquartered in China, specializes in the development, production and distribution of automotive brake systems and other key safety related auto parts. The company's customer base consists of original equipment manufacturers, aftermarket distributors and international customers. The company has a VGM Score of A.

The stock has experienced solid estimate revisions. In fact, the Zacks Consensus Estimate for full-year 2017 earnings has increased 25.4% in a month’s time.

Broadcom Limited AVGO designs, develops and supplies a range of semiconductor devices worldwide. The company has a VGM Score of B.

Broadcom has a long-term growth rate of 13.8%. Further, the stock has experienced positive estimate revisions with the Zacks Consensus Estimate for fiscal 2018 earnings moving 6.5% north in a week’s time.  

POSCO PKX, formerly known as Pohang Iron and Steel Company, is a South Korean company. Its broad product line includes hot-rolled and cold-rolled products, plates, wire rods and stainless steel products. The company has a VGM Score of A.

POSCO has a long-term growth rate of 5%. Moreover, the stock has experienced solid estimate revisions, reflecting analysts’ bullishness. In fact, the Zacks Consensus Estimate for 2017 earnings has increased 8.4% over the past two months.

Columbus McKinnon Corporation CMCO, headquartered in Getzville, NY, is a broad-line designer, manufacturer and supplier of sophisticated material handling products, technologies and services. The company has a VGM Score of B.

Columbus McKinnon has experienced positive estimate revisions with the Zacks Consensus Estimate for fiscal 2018 earnings moving 1% north in two months’ time.  

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.

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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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SORL Auto Parts, Inc. (SORL) : Free Stock Analysis Report
 
Broadcom Limited (AVGO) : Free Stock Analysis Report
 
Columbus McKinnon Corporation (CMCO) : Free Stock Analysis Report
 
POSCO (PKX) : Free Stock Analysis Report
 
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