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Look Beyond Earnings: 4 Stocks With Swelling Cash Flows

Zacks Equity Research
The Dow Jones registered its best week since November. This is likely to benefit a few funds given the Mexico trade deal, a dovish Fed and possibilities of an oil price rally.

We are in one of the busiest weeks of the current-reporting cycle, and betting on stocks based on profit numbers and earnings surprise appears trendy. But looking beyond profits and figuring out a company’s cash position can be far more rewarding.

This is because, even though profit is a company’s goal, cash is a necessity for its existence, development and success, and indeed a measure of resiliency. In fact, even a profit-making company can face cash trouble and end up being bankrupt while meeting its obligations. But a company with a solid cash flow can endure any market mayhem besides enjoying flexibility in decision making, chasing potential investments and fueling its growth engine.

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 eight stocks that qualified the screening:

Hitachi, Ltd. HTHIY, headquartered in Tokyo, is one of the world's leading global electronics companies, engaged in manufacturing and marketing of a wide range of products, including semiconductors, consumer products, and power and industrial equipment. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for fiscal 2019 earnings moved up 4.9% to $8.34 in a month’s time.

Gray Television, Inc. GTN is a communications company headquartered in Atlanta, GA. It currently owns and operates television stations as well as digital assets in markets across the United States. The company has a VGM Score of A. Also, the Zacks Consensus Estimate for 2018 earnings moved 5.5% north to $2.30 in the last 60 days.

SP Plus Corporation SP, based in Chicago, IL, provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry. The stock has a VGM Score of A. The Zacks Consensus Estimate for full-year 2019 earnings climbed 8.4% in two months’ time.

Ingles Markets, Inc. IMKTA, headquartered in Black Mountain, NC, is a leading supermarket chain with operations in the Southeastern United States. The company has a VGM Score of A. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2019 earnings moving 3.2% north in two months’ time.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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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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Gray Television, Inc. (GTN) : Free Stock Analysis Report
 
Hitachi Ltd. (HTHIY) : Free Stock Analysis Report
 
Ingles Markets, Incorporated (IMKTA) : Free Stock Analysis Report
 
SP Plus Corporation (SP) : Free Stock Analysis Report
 
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