Crunching profit numbers and evaluating surprises might appear a good option in this final stretch of the current reporting cycle. But looking beyond profits and evaluating a company’s cash position can be far more rewarding. This is because, even though profit is a company’s goal, cash is its lifeblood for existence and a measure of resiliency.
In fact, a dearth of cash flow can compel even a profit-making company to face bankruptcy while meeting its obligations. However, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run 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.
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 10 stocks that qualified the screening:
Columbus McKinnon Corporation CMCO, headquartered in Getzville, NY, is a broad-line designer, manufacturer and supplier of sophisticated material handling products, technologies and services. The company has a VGM Score of A. Columbus McKinnon has experienced positive estimate revisions with the Zacks Consensus Estimate for fiscal 2019 earnings moving 6% north in a week’s time.
Verso Corp. VRS, based in Miamisburg, OH, produces coated freesheet, coated ground wood, and uncoated super calendared papers and pulp. It serves to magazine and catalog publishers, commercial printers, specialty retail merchandisers and paper merchants. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for current-year earnings has increased to $3.09 from $2.01 in the last 60 days.
Turtle Beach Corp. HEAR is a San Diego, CA-based audio technology company that designs audio products for consumer, commercial and healthcare markets. The company has a VGM Score of B. Turtle Beach has a projected long-term EPS growth rate of 15%. Additionally, over the past month, the Zacks Consensus Estimate for 2018 earnings increased 13.8% to $2.47.
The Woodlands, TX-based Conn’s, Inc. CONN is a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, as well as provider of consumer credit. The stock has a VGM Score of B. The Zacks Consensus Estimate for fiscal 2019 has improved by 1.7% to $2.45 over the last 60 days.
Lisle, IL-based SunCoke Energy, Inc. SXC is a producer of metallurgical coke in the Americas. The company has a VGM Score of B. Moreover, the Zacks Consensus Estimate for 2018 earnings increased 31.0% to 38 cents per share in the last 30 days.
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.
Click here to sign up for a free trial to the Research Wizard today.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Turtle Beach Corporation (HEAR) : Free Stock Analysis Report
SunCoke Energy, Inc. (SXC) : Free Stock Analysis Report
Columbus McKinnon Corporation (CMCO) : Free Stock Analysis Report
Verso Corporation (VRS) : Free Stock Analysis Report
Conn's, Inc. (CONN) : Free Stock Analysis Report
To read this article on Zacks.com click here.