Bet on 4 Stocks with Increasing Cash Flows

Cash indicates a company’s true financial health. It is key to its existence, development and success. It offers the flexibility to make decisions, the means to make investments and the fuel to run its growth engine.

In fact, even a profit-making company can succumb to failure while meeting its obligations if it has a dearth of cash flow. But one can effectively judge a company’s resilience by evaluating its power of generating cash flows, as cash not only guards a company from market mayhem but also indicates that profits are being channelized in the right direction.

To understand this efficiency, one needs to consider a company’s net cash flow. In any business, cash moves in and out. Net cash flow explains how much money the company is actually making. 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, positive cash flow alone is not sufficient to predict a company’s growth. Consistent growth can only be achieved when this positive cash flow is rising. This reflects management’s efficiency in regulating its cash movements and lesser dependency on external financing sources to run 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 the seven stocks that qualified the screening:

The Marcus Corporation MCS, headquartered in Milwaukee, WI, is the owner and operator of movie theatres, hotels and resorts. The company has substantial company-owned real estate assets. The company has a VGM Score of A.

The Zacks Consensus Estimate for 2017 earnings increased 1.2% over the past 30 days to $1.65. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters with an average positive earnings surprise of 15.38%.

Moreover, The Marcus has logged in a return of 68.6% over the past one year, which is way better than the 22.0% gain witnessed by the Zacks categorized Leisure And Recreation Services industry.

PCM, Inc. PCMI, based in El Segundo, CA, is a technology solutions provider to businesses, government and educational institutions as well as individual consumers. The company has a VGM score of A. Moreover, it has an expected long-term growth rate of 30.0%.

Also, PCM, Inc. has logged returns of 82.7% over the past one year, which is way better than the 3.9% loss experienced by the Zacks categorized Consumer Products - Discretionary industry.

U.S. Concrete, Inc. USCR, based in Euless, TX, operates as a provider of ready-mixed concrete and concrete-related products and services to the construction industry in the United States. The company has a VGM Score of A.

The Zacks Consensus Estimate for 2017 earnings has increased 12.5% over the past 30 days to $3.88. Also, over the past six months, U.S. Concrete, Inc.’s shares have outperformed the Zacks categorized Building Products - Concrete And Aggregates industry, registering returns of 11.9% against the industry’s increase of 1.1%.

Autobytel Inc. ABTL, headquartered in Irvine, CA, is an internationally branded online automotive commerce company that provides consumers with automotive solutions throughout the lifecycle of vehicle ownership. The company has a VGM Score of A.

The Zacks Consensus Estimate for 2017 earnings has increased 7.8% over the past 30 days to 97 cents. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters with an average positive earnings surprise of 41.98%

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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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