If achieving profit is a company’s goal then having healthy cash flow is most essential to its existence, development and success. This is because cash offers strength, vitality and flexibility to make investment decisions as well as the fuel to run its growth engine.
Often investors flock to companies that earn profits. But even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. Specifically, a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed. This is because cash not only shields a company from market mayhem but also indicates that profits are being channelized in the right direction. Cash is indeed the lifeblood of any business and indicates a company’s true financial health.
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 15 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 has moved 34.3% north to 47 cents in the last 30 days.
Santa Cruz, CA-based Plantronics Inc. PLT is a global leader in audio communications for businesses and consumers, which allow people to communicate simply. It has a VGM Score of A. The company’s expected earnings growth for fiscal 2019 is 34.08%. The stock has witnessed positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2019 earnings improving 78.3% over the last 60 days to $4.76.
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 A. The company’s expected earnings growth for the current year is 9.06%. The Zacks Consensus Estimate for current-year earnings has been revised 5.1% upward in the last 60 days.
Middlefield Banc Corp. MBCN, headquartered in Middlefield, OH, is the bank holding company for The Middlefield Banking Company, which offers a range of banking products and services. The stock has a VGM Score of B. The company’s projected growth rate for the current year is 10.7%. The Zacks Consensus Estimate for the current year has improved 6% over the last 60 days.
Walker & Dunlop, Inc. WD, based IN Bethesda, MD, is a commercial real estate finance company in the United States, offering a broad range of capital solutions for all commercial real estate asset classes, as well as investment sales brokerage services to owners of multifamily properties. The stock has a VGM Score of B. The Zacks Consensus Estimate for full-year 2019 earnings climbed 4.2% in a month’s time.
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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.
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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
Plantronics, Inc. (PLT) : Free Stock Analysis Report
Middlefield Banc Corp. (MBCN) : Free Stock Analysis Report
Walker & Dunlop, Inc. (WD) : Free Stock Analysis Report
Kamada Ltd. (KMDA) : Free Stock Analysis Report
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