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Look Beyond Profit, Bet on These 4 Stocks With Solid Cash Flows
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Crunching profit numbers and evaluating surprises might appear a good option in the ongoing reporting cycle but these do not ensure that the profits are being efficiently channeled to the reserves for funding growth. This is because even a profit-making company can have a deficiency of cash flow and might go bankrupt while meeting its obligations.
Therefore, one must look at a company’s proficiency in generating cash flows in order to ensure investing in the right stocks. This is because cash is the most indispensable factor for any company. It gives strength and vitality and is the key for its existence, development and success.
In fact, analyzing a company’s cash-generating efficiency has indeed become more relevant amid the health crisis that has given rise to uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns.
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 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 the four out of the nine stocks that qualified the screening:
Matson Inc. (MATX - Free Report) provides ocean transportation and logistics services. It offers shipping services in Hawaii, Guam, and Micronesia islands, and expedited services from China to Southern California. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $4.14 for 2021 earnings has been revised 21.4% upward over the past month.
Mueller Industries Inc. (MLI - Free Report) manufactures and sells copper, brass, aluminum, and plastic products in North America, Europe, Asia, and the Middle East. Currently, the stock has a VGM Score of A. The company has an expected earnings growth rate of 17% for the current year. The Zacks Consensus Estimate for this year has improved more than 100% over the last 60 days.
PEUGEOT SA manufactures and sells passenger cars and light commercial vehicles under the Peugeot, Citroën and DS brands; and automotive equipment, including interior systems, automotive seating, automotive exteriors and emission-control technologies. It also offers retail financing to car customers and wholesale financing to dealer networks. Currently, the stock has a VGM Score of A. The Zacks Consensus Estimate for its ongoing-year earnings has moved up 15.3% over the past month to $5.81.
Herc Holdings, Inc. (HRI - Free Report) is an equipment rental supplier primarily in North America. This company has a VGM Score of B, at present. The Zacks Consensus Estimate of $3.35 for current-year earnings has moved 2.4% north in 30 days’ 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.
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.
Image: Bigstock
Look Beyond Profit, Bet on These 4 Stocks With Solid Cash Flows
Crunching profit numbers and evaluating surprises might appear a good option in the ongoing reporting cycle but these do not ensure that the profits are being efficiently channeled to the reserves for funding growth. This is because even a profit-making company can have a deficiency of cash flow and might go bankrupt while meeting its obligations.
Therefore, one must look at a company’s proficiency in generating cash flows in order to ensure investing in the right stocks. This is because cash is the most indispensable factor for any company. It gives strength and vitality and is the key for its existence, development and success.
In fact, analyzing a company’s cash-generating efficiency has indeed become more relevant amid the health crisis that has given rise to uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns.
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 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 the four out of the nine stocks that qualified the screening:
Matson Inc. (MATX - Free Report) provides ocean transportation and logistics services. It offers shipping services in Hawaii, Guam, and Micronesia islands, and expedited services from China to Southern California. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $4.14 for 2021 earnings has been revised 21.4% upward over the past month.
Mueller Industries Inc. (MLI - Free Report) manufactures and sells copper, brass, aluminum, and plastic products in North America, Europe, Asia, and the Middle East. Currently, the stock has a VGM Score of A. The company has an expected earnings growth rate of 17% for the current year. The Zacks Consensus Estimate for this year has improved more than 100% over the last 60 days.
PEUGEOT SA manufactures and sells passenger cars and light commercial vehicles under the Peugeot, Citroën and DS brands; and automotive equipment, including interior systems, automotive seating, automotive exteriors and emission-control technologies. It also offers retail financing to car customers and wholesale financing to dealer networks. Currently, the stock has a VGM Score of A. The Zacks Consensus Estimate for its ongoing-year earnings has moved up 15.3% over the past month to $5.81.
Herc Holdings, Inc. (HRI - Free Report) is an equipment rental supplier primarily in North America. This company has a VGM Score of B, at present. The Zacks Consensus Estimate of $3.35 for current-year earnings has moved 2.4% north in 30 days’ 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.
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.