If generating profit is a company’s goal, then a healthy cash flow is highly essential for its existence, development and success. This is because cash provides more flexibility to a company, with respect to business decisions and potential investments, as well as the fuel to run its growth engine. In fact, cash indicates a company’s true financial health.
Though investors mostly flock to companies that earn profits, 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 cash-flow generating efficiency. This is because cash not only shields it from market mayhem, but also indicates that profits are being channelized in the right direction.
To find this efficiency, one needs to consider a company’s net cash flow figure. 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. 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.
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 out of 12 stocks that qualified the screening:
Ingles Markets, Inc. IMKTA is a leading supermarket chain with operations in the Southeastern United States. The company has a VGM Score of A. The stock has witnessed positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2019 earnings moving 14.7% north in two months’ time.
Based in Austin, TX, Hanger Inc. HNGR offers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for 2019 earnings of 87 cents moved up 3.6% over the past 60 days.
Irvine, CA -based Tilly's Inc. TLYS is a specialty retailer in the action sports industry, selling clothing, shoes and accessories. It has a VGM Score of A. The projected long-term growth rate for the company is 11%. Moreover, the Zacks Consensus Estimate for fiscal 2019 moved north 12.2% to 83 cents over the last 60 days.
Turtle Beach Corp. HEAR is a San Diego, CA-based audio technology company that designs audio products for consumer, commercial and healthcare markets. The company has a VGM Score of B. Additionally, over the past two months, the Zacks Consensus Estimate for the ongoing year’s earnings moved 10.1% upward to 98 cents.
Alpine, UT-based Purple Innovation, Inc. PRPL is a publicly-traded designer and manufacture of mattresses, pillows and cushions. The stock has a VGM Score of A. Purple Innovation’s expected earnings growth rate for the next year is 64.8%, ahead of the industry’s projected rally of 22.9%. The Zacks Consensus Estimate for current-year earnings of $1.76 remained unchanged over the past 30 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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Turtle Beach Corporation (HEAR) : Free Stock Analysis Report
Tilly's, Inc. (TLYS) : Free Stock Analysis Report
Ingles Markets, Incorporated (IMKTA) : Free Stock Analysis Report
PURPLE INNOVATION, INC. (PRPL) : Free Stock Analysis Report
Hanger Inc. (HNGR) : Free Stock Analysis Report
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