If achieving profit is a company’s goal then having a healthy cash flow is the most essential to its existence, development and success. This is because cash offers the flexibility to make decisions, the means to make investments as well as the fuel to run its growth engine. Thus, it can safely be called the lifeblood of any business.
Often investors flock to companies that earn profits. However, even a profitable business can succumb to failure if its cash flow is uneven and eventually, file bankruptcy. Therefore, one must go beyond profit numbers for prudent investment and look at a company’s efficiency in generating cash flows because cash protects it from market mayhem and indicates that profits are being channelized in the right direction.
In addition, with the coronavirus pandemic wreaking havoc on the global economy, and the related market disruption adversely impacting liquidity, investing your hard-earned money in stocks based on their cash-flow generating efficiency has become all the more essential.
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 the four out of the nine stocks that qualified the screening:
Titan Machinery Inc. TITN: The company owns and operates a network of full service agricultural and construction equipment dealer locations in North America and Europe.The stock currently has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward to $1.67 from $1.44 in a month’s time.
Townsquare Media Inc. TSQ operates as a radio, digital media, entertainment, and digital marketing solutions company in small and mid-sized markets. The stock currently sports a VGM Score of A. The Zacks Consensus Estimate for 2021 earnings has moved up 13% over the past 30 days.
Citi Trends, Inc. CTRN is a value-priced retailer of urban fashion apparel and accessories for the entire family. The stock currently carries a VGM Score of A. The Zacks Consensus Estimate of $5.00 for fiscal 2022 earnings, calls for a 110.08% increase year on year.
Veritiv Corporation VRTV engages in offering North American business-to-business distribution solutions. It provides packaging, print and print management, publishing, supply chain, facility and logistics solutions that span the entire lifecycle of core business operations. At present, the stock carries a VGM Score of B. The Zacks Consensus Estimate of $4.50 for the current-year earnings has moved 67% north over the past 60 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.
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Citi Trends, Inc. (CTRN) : Free Stock Analysis Report
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Veritiv Corporation (VRTV) : Free Stock Analysis Report
Townsquare Media, Inc. (TSQ) : Free Stock Analysis Report
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