If achieving profit is a company’s goal then having a healthy cash flow is most essential to its existence, development and success. Cash offers the flexibility to make decisions, the means to make investments, the fuel to run its growth engine and can indeed be called the lifeblood of any business.
Often investors flock to companies that earn profits. But even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations.
Therefore, to invest in the right stocks, one must go beyond profit numbers and look at a company’s efficiency in generating cash flows because cash not only guards a company from market mayhem, but also indicates that profits are being channelized in the right direction.
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.
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 out of eight stocks that qualified the screening:
Solid Picks With Rising Cash Flows: Delta Apparel, Inc. (DLA)
Delta Apparel, Inc. (NYSEAMERICAN:DLA), headquartered in Greenville, SC, is an international design, marketing, manufacturing and sourcing company having a portfolio of basic and branded apparel, headwear and related accessories. The company has a VGM Score of A.
Delta Apparel has a projected long-term EPS growth rate of 15%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings moving 11.1% north in a month’s time.
Solid Picks With Rising Cash Flows: Turtle Beach Corp (HEAR)
Turtle Beach Corp (NASDAQ: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 A. Moreover, the Zacks Consensus Estimate for 2018 earnings increased to 97 cents per share from 37 cents in the past 30 days.
Solid Picks With Rising Cash Flows: MSA Safety Inc (MSA)
Based in Cranberry Township, PA, MSA Safety Inc (NYSE:MSA) is engaged in the development, manufacture and supply of safety products that protect people and facility infrastructures. The company has a VGM Score of B.
MSA Safety has expected earnings growth of 24.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.1% in two months’ time.
Solid Picks With Rising Cash Flows: QuinStreet Inc (QNST)
QuinStreet Inc (NASDAQ:QNST), based in Foster City, CA, is a provider of online direct marketing and media services. The company has a VGM Score of A.
QuinStreet has a projected long-term EPS growth rate of 25%. The stock has experienced positive estimate revisions, with the Zacks Consensus Estimate for fiscal 2018 earnings increasing 25% in two months’ 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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »