Look Beyond Earnings, Bet on 4 Stocks With Rising Cash Flows
Investors can be lured by profits and earnings surprises in the ongoing reporting cycle. However, during this earnings season and beyond, betting on stocks with a healthy cash level can be far more rewarding because cash is the lifeblood for a company’s existence, a measure of resiliency, and a revelation of its true financial health.
In this regard, stocks like Griffon Corporation GFF, The Andersons, Inc. ANDE, Ardmore Shipping Corporation ASC and Limbach Holdings, Inc. LMB are worth buying.
In fact, even after reaping profits, a company can face a dearth of cash flow and be bankrupt while meeting its obligations if its profits are not channeled in the right direction. However, a company with adequate cash flows can effectively tide over any market mayhem besides enjoying flexibility in decision making and chasing potential investments.
Analyzing a company’s cash-generating efficiency has indeed become more relevant amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns. Therefore, looking at a company’s ability to produce cash is important not only in terms of protecting your money but also for multiplying it.
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, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the 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 industry categories.
Here are our four picks out of the 14 stocks that qualified the screening:
Griffon Corporation, a diversified management and holding company, operates through wholly-owned subsidiaries. It provides consumer and professional, as well as home and building products.
The Zacks Consensus Estimate for Griffon Corporation’ fiscal 2023 earnings per share has been revised 5.5% upward to $4.38 in the past two months. GFF has a VGM Score of A.
The Andersons is a regional grain merchandiser with diversified businesses in agriculture, plant nutrient formulation and distribution, turf product production, railcar marketing and general merchandise retailing that generate revenues. The company maintains grain and production facilities throughout the Midwest and retail locations in northern and central Ohio.
The Zacks Consensus Estimate for Andersons’ current-year earnings has been revised upward by 3.3% in the past two months to $3.12 per share. ANDE currently has a VGM Score of A.
Ardmore Shipping engages in the ownership and operation of product and chemical tankers. It provides shipping services to customers through voyage charters, commercial pools and time charters. The company provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies.
The Zacks Consensus Estimate for Ardmore Shipping’s 2023 earnings has been increased a cent to $2.59 per share in the past week. ASC has a VGM Score of B.
Limbach Holdings provides building systems. The company engineers, constructs and services mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems.
The Zacks Consensus Estimate for Limbach Holdings’s 2023 earnings has moved 21.4% north in the past two months to $1.36 per share. LMB sports a VGM Score of A.
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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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The Andersons, Inc. (ANDE) : Free Stock Analysis Report
Ardmore Shipping Corporation (ASC) : Free Stock Analysis Report
Limbach Holdings, Inc. (LMB) : Free Stock Analysis Report
Griffon Corporation (GFF) : Free Stock Analysis Report
