October 25, 2021

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Look Beyond Profit, Bet on 5 Stocks With Rising Cash Flows

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.

Admittedly, investors flock to companies that earn profits but even a profitable business can succumb to failure if its cash flow is irregular and eventually file for bankruptcy. But 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.

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 five of the 13 stocks that qualified the screening:

Anhui Conch Cement Company Limited AHCHY, together with its subsidiaries, manufactures and sells clinkers and cement products under the CONCH brand in the People’s Republic of China and internationally. It also provides construction and installation services for industrial purposes; logistic and loading services; and mining and related services. The stock has a VGM Score of B. The Zacks Consensus Estimate for this year’s earnings moved 19.2% north to $4.72 in 60 days’ time.

Chicago-based Enova International Inc. ENVA is a provider of online financial services. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for current-year earnings has been revised 5% upward to $4.64 in the past 30 days.

Headquartered in Carle Place, NY, 1-800-FLOWERS.COM, Inc. FLWS is an e-commerce provider of floral products and gifts. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for fiscal 2020 earnings moved up 3.4% to 61 cents over the past 30 days.

Forterra Inc. FRTA is engaged in manufacturing and sale of pipe and precast products in the United States and Canada, and Mexico. It has a VGM Score of A. The Zacks Consensus Estimate for the ongoing-year earnings improved significantly to 58 cents from 24 cents over the past 60 days.

SYNNEX Corporation SNX, based in Fremont, CA, is a leading business process services company, offers a full range of distribution, logistics and integration services for the technology industry, as well as outsourced services focused on customer engagement to a wide array of enterprises. The stock has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has moved 5.8% north to $13.97 in 60 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.

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