Cash is the lifeblood of any business. It offers strength, vitality and flexibility to make investment decisions as well as the fuel to run its growth engine. Moreover, cash shields a company from market turmoil and indicates that profits are being channelized in the right direction.
In fact, one must go beyond profit numbers and look at a company’s efficiency in generating cash flows to invest in the right stocks. This is because even a profit-making company can have a dearth of cash flow and fail to meet its obligations. However, a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed.
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 13 stocks that qualified the screening:
Ingles Markets, Inc. IMKTA is a leading supermarket chain with operations in the Southeastern United States. The company has a VGM Score of A. The stock has witnessed positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2019 earnings moving 14.7% north in two months’ time.
OneMain Holdings, Inc. OMF provides consumer finance, and insurance products and services. The stock has a VGM Score of A. The Zacks Consensus Estimate for the current year moved 7.9% upward, over the past 60 days.
Based in Austin, TX, Hanger Inc. HNGR offers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for 2019 earnings of 87 cents remained unchanged over the past 30 days.
Standard Motor Products, Inc. SMP, based in Long Island City, NY, is a manufacturer and distributor of automotive replacement parts. The stock has a VGM Score of A. The Zacks Consensus Estimate for the current-year earnings has been revised 1.6% upward in the past seven days.
North American Construction Group Ltd. NOA is involved primarily in providing services related to mining and heavy construction in Canada. The stock has a VGM Score of B. The Zacks Consensus Estimate for the ongoing year’s earnings of $1.37 indicates a significant improvement from 42 cents earned a year ago.
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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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Standard Motor Products, Inc. (SMP) : Free Stock Analysis Report
OneMain Holdings, Inc. (OMF) : Free Stock Analysis Report
North American Construction Group Ltd. (NOA) : Free Stock Analysis Report
Ingles Markets, Incorporated (IMKTA) : Free Stock Analysis Report
Hanger Inc. (HNGR) : Free Stock Analysis Report
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