The coronavirus pandemic has been wreaking havoc across the globe, leading to market disruptions and substantial impact on liquidity. Amid this, putting your hard-earned money on stocks backed by rising cash flows has become all the more essential.
This is because even a profitable business can eventually fail to meet its obligations and succumb to failure if its cash flow is uneven. However, one can sail through any market mayhem if it has the cash shield.
In fact, cash is the lifeblood of any business, and provides vitality and strength to a company. It holds the key to a company’s existence, development and success, and indicates its true financial health. Moreover, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves, helping it enjoy the flexibility to make decisions, chase potential investments and run its growth engine.
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.
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 four of the nine stocks that qualified the screening:
BioSpecificsTechnologies Corporation BSTC is engaged in the business of producing and licensing, for sale by other, an FDA-approved enzyme derived from collagenase, named Collagenase ABC. It is also involved in researching, developing and clinically testing additional products derived therefrom for potential use as pharmaceuticals. The stock has a VGM Score of B. The Zacks Consensus Estimate of $3.79 for this year’s earnings moved upward by four cents over the past 60 days.
eXp World Holdings Inc. EXPI provides cloud-based real estate brokerage services primarily in the United States and Canada. The stock has a VGM Score of B. The Zacks Consensus Estimate for the ongoing-year earnings per share has been revised upward over the last 60 days. Also, the estimate for current-year sales indicates a 46.2% jump, year on year.
Elbit Systems Ltd. ESLT, an Israel-headquartered international technology company,is engaged in a vast array of defense, homeland security and commercial programs throughout the world, operating in areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance among others. It has a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings indicates 12.7% growth year on year on revenue increase of 8.8%.
KoninklijkeVopak N.V. VOPKY engages in tank terminal operations and storage of oil. It has a VGM Score of B. The company’s expected earnings growth rate for the current year is 7.6%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 30 days.
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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.