Buy These 5 Stocks With Rising Cash Flows Ahead of Q1 Earnings
Crunching profit numbers and evaluating surprises might be a preferred method for scooping up big gains in the impending Q1 earnings season. However, looking beyond profits and assessing a company’s cash position can be far more rewarding because that indicates its true financial health.
This is because although profit is a company’s goal, cash is the lifeblood for its existence, development and success, and indeed a measure of its resilience. In fact, even a profitable business can fail if its cash flow is uneven and eventually file for bankruptcy. Nevertheless, a company with a healthy cash position has the capability to effectively tide over any market mayhem and still be on its growth curve, besides enjoying flexibility to make decisions, chase potential investments and run its growth engine.
Furthermore, analyzing a company’s cash-generating efficiency holds more relevance in the current context as the coronavirus pandemic is giving rise to uncertainties in the global economy, market disruptions and dislocations, and liquidity concerns.
To figure out this efficiency, one needs to consider a company’s net cash flow. 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.
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 the five out of the 11 stocks that qualified the screening:
Internet Initiative Japan, Inc. IIJIY: The company offers a comprehensive range of Internet access and other network services mainly to enterprise customers and also to other Internet service providers in Japan.The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for the fiscal year ending March 2021 moved up 25.8% from 66 cents to 83 cents over the past month.
L.B. Foster Company FSTR is engaged in the manufacture, fabrication and distribution of rail and trackwork, piling, highway products and tubular products. It also sells and rents steel sheet piling and H-bearing pile for foundation and earth-retention requirements in the construction industry. For tubular markets, Foster supplies pipe and pipe coatings for pipelines and produces pipe-related products for special markets.This company has a VGM Score of A, at present. The Zacks Consensus Estimate of 92 cents for this year’s earnings has moved 8.2% north in 60 days’ time.
Matson Inc. MATX provides ocean transportation and logistics services. It offers shipping services in Hawaii, Guam and Micronesia islands, and expedited services from China to Southern California. At present, the stock has a VGM Score of B. The Zacks Consensus Estimate of $5.49 for 2021 earnings has been revised 22.3% upward over the past two months.
Select Medical Holdings Corporation SEM is a healthcare company, which owns long-term acute care and inpatient rehabilitation hospitals as well as occupational health and physical therapy clinics. The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for its ongoing-year earnings has been revised upward to $2.23 from $1.51 in the past 60 days.
Veritiv Corporation VRTV engages in offering North American business-to-business distribution solutions. It provides packaging, print and print management, publishing, supply chain, facility and logistics solutions that span the entire lifecycle of core business operations. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $2.70 for the current-year earnings has moved 80% north over the past 60 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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Matson, Inc. (MATX) : Free Stock Analysis Report
L.B. Foster Company (FSTR) : Free Stock Analysis Report
Select Medical Holdings Corporation (SEM) : Free Stock Analysis Report
Veritiv Corporation (VRTV) : Free Stock Analysis Report
Internet Initiative Japan, Inc. (IIJIY) : Free Stock Analysis Report
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