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Look Beyond Earnings: 4 Stocks With Increasing Cash Flows

Moumita C. Chattopadhyay

We are already into the second-quarter reporting cycle and investors can be lured by healthy profits and solid earnings surprises. But even a profit-making company can have a dearth of cash flow and face bankruptcy if its profits are not channelized in the right direction.

Therefore, looking beyond profits to a company’s cash position will be far more rewarding because this indicates its true financial health. In fact, cash is the most essential factor for any company, the lifeblood for its existence, development and success. It is the fuel for a company’s growth and cushion amid downturn.

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.

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 stocks that qualified the screening:

Israel-based Kamada Ltd. KMDA develops, produces and markets specialty plasma-derived protein therapeutics. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for 2019 earnings moved 6.3% north to 51 cents, in the last 60 days.

Anhui Conch Cement Company Limited AHCHY, together with its subsidiaries, manufactures and sells clinkers and cement products under the CONCH brand in the People's Republic of China and internationally. It also provides construction and installation services for industrial purposes; logistic and loading services; and mining and related services. The stock has a VGM Score of A. The Zacks Consensus Estimate for 2019 earnings was revised 12.2% upward in the past 60 days.

Air China Limited AIRYY provides airline and airline-related services. It provides air passenger and air cargo services along with aircraft engineering, ground services, air catering services and other airline-related services. The stock has a VGM Score of A. The Zacks Consensus Estimate for the current year improved by 43.5% over the past 60 days.

Air Transport Services ATSG provides air cargo transportation and related services to domestic and foreign air carriers, and other companies that outsource their air cargo lift requirements. It has a VGM Score of B. The Zacks Consensus Estimate for current-year earnings has increased 2.3% in 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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Air China Ltd. (AIRYY) : Free Stock Analysis Report
 
Anhui Conch Cement Co. (AHCHY) : Free Stock Analysis Report
 
Kamada Ltd. (KMDA) : Free Stock Analysis Report
 
Air Transport Services Group, Inc (ATSG) : Free Stock Analysis Report
 
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