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Bet on 4 Stocks With Swelling Cash Flows to Boost Portfolio

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.

Cash is crucial to a company and offers strength and vitality. It gives a company the flexibility to make investment decisions and fuel to run its growth engine.

Obviously, investors 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, a company’s resilience can be effectively judged by evaluating its efficiency in 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. It is, in fact, an indicator of its true financial health.

To find this efficiency, one needs to consider its net cash flow figure. While in any business cash moves in and out, it is net cash flow that explains how much money the 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.

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 10 stocks that qualified the screening:

Delta Apparel, Inc. DLA, headquartered in Greenville, SC, is an international design, marketing, manufacturing, and sourcing company having a portfolio of basic and branded apparel, headwear and related accessories. The company has a VGM Score of A.

Delta Apparel has a projected long-term EPS growth rate of 15%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings moving 11.1% north in a month’s time.

Tempe, AZ-based Amtech Systems, Inc. ASYS is engaged in manufacturing and selling of capital equipment and associated consumables for use in fabricating solar cells, LED and semiconductor devices.

The company has a VGM Score of A and delivered an average four-quarter positive earnings surprise of 400.51%. The Zacks Consensus Estimate for fiscal 2018 earnings improved 22% to 61 cents in a week’s time.

QuinStreet, Inc. QNST, based in Foster City, CA, is a provider of online direct marketing and media services. The company has a VGM Score of A.

QuinStreet has a projected long-term EPS growth rate of 25%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings increasing 22.2% in a month’s time.

Netherlands-based Koninklijke DSM N.V. RDSMY is a global science-based company engaged in health, nutrition and materials. The company has a VGM Score of A.

It also has a long-term expected EPS growth rate of 7.7%. Moreover, the stock has seen the Zacks Consensus Estimate for 2018 earnings being revised 25% upward in two months’ 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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QuinStreet, Inc. (QNST) : Free Stock Analysis Report
Koninklijke DSM NV (RDSMY) : Free Stock Analysis Report
Amtech Systems, Inc. (ASYS) : Free Stock Analysis Report
Delta Apparel, Inc. (DLA) : Free Stock Analysis Report
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