Investors obviously look for profitable businesses. However, even a profit-making company can end up being bankrupt while meeting its obligations if it has a dearth of cash flow. So, instead of brooding too much on profit numbers, effectively judging a company’s resiliency by assessing its efficacy in generating cash flows can be far more rewarding.
This is because, cash is the key to a company’s existence, development and success. It offers the flexibility to make decisions, the means to make investments and the fuel to run its growth engine, thereby indicating a company’s true financial health. In fact, cash not only shields a company 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 the 13 stocks that qualified the screening:
Headquartered in Hato Rey, Puerto Rico, Popular, Inc. BPOP is a publicly owned bank holding company, which provides its products and services, primarily to institutional and retail customers. The stock has a VGM Score of A. The Zacks Consensus Estimate for 2019 earnings has moved 7% north to $6.59 over the last 30 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 company’s projected growth rate for the fiscal 2019 is 6.25%. The Zacks Consensus Estimate for fiscal 2019 has remained unchanged at 85 cents over the last 30 days.
Chicago-based Enova International Inc. ENVA is a provider of online financial services. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for current-year earnings has been revised 6.1% upward to $3.30 in the past 30 days.
Domiciled in St. George, UT, SkyWest, Inc. SKYW is the holding company for SkyWest Airlines and an aircraft leasing company. SkyWest provides commercial air service in cities throughout North America. The stock has a VGM Score of B. The company’s expected earnings growth for the current year is 14.9%. The Zacks Consensus Estimate for current-year earnings has been revised 3.9% upward, in a month’s time.
Bermuda-based Argo Group International Holdings, Ltd. ARGO underwrites specialty insurance and reinsurance products in the property and casualty markets. The stock has a VGM Score of B. The Zacks Consensus Estimate of $4.27 for 2019 earnings has been upped 6% 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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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
Popular, Inc. (BPOP) : Free Stock Analysis Report
Enova International, Inc. (ENVA) : Free Stock Analysis Report
Tilly's, Inc. (TLYS) : Free Stock Analysis Report
Argo Group International Holdings, Ltd. (ARGO) : Free Stock Analysis Report
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