4 Stocks Powered by Increasing Cash Flow for Your Portfolio
Investing one’s hard-earned money in stocks with high profits and impressive earnings surprise records is a common practice during the final leg of a reporting cycle. However, rather than brooding too much on profit numbers, judging a company’s resiliency by assessing its efficacy in generating cash flow can be far more rewarding.
In this regard, stocks like Weatherford International plc WFRD, M/I Homes, Inc. MHO, Veritiv Corporation VRTV and EZCORP, Inc. EZPW are worth buying.
This is because cash indicates a company’s true financial health. It offers the flexibility to make decisions, the means to make potential investments as well as the fuel to run its growth engine. In fact, even a profit-generating company might face bankruptcy while meeting obligations if it is low on cash flow. Nevertheless, a sturdy cash balance can cushion these firms in case of any market turbulence.
Moreover, with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns, analyzing a company’s cash-generating efficiency holds more relevance in the current context.
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, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the 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 industry categories.
Here are our four picks out of the 16 stocks that qualified the screening:
Weatherford International provides oil field services and equipment. The company offers drilling solutions, gas well unloading, restoration and other related activities.
The Zacks Consensus Estimate for 2023 earnings per share has improved 22.1% over the past month to $4.87 per share. Currently, WFRD carries a VGM Score of A.
M/I Homes is one of the nation's leading builders of single-family homes. The company designs, markets, constructs and sells single-family homes and attached townhomes to first-time, move-up, empty-nester and luxury buyers.
The Zacks Consensus Estimate for M/I Homes’ current-year earnings has moved up 11.5% over the past month to $12.40 per share. Currently, MHO carries a VGM Score of A.
Veritiv Corporation 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.
The Zacks Consensus Estimate for 2023 earnings has moved up 3.6% in the past week to $20.20 per share. Currently, VRTV carries a VGM Score of A.
EZCORP is engaged in establishing, acquiring and operating pawnshops, which function as convenient sources of consumer credit and as value-oriented specialty retailers of primarily previously owned merchandise.
The Zacks Consensus Estimate for EZCORP’s fiscal 2023 earnings has been revised 13.3% upward to 85 cents per share in the past week. Currently, EZPW has a VGM Score of A.
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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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EZCORP, Inc. (EZPW) : Free Stock Analysis Report
M/I Homes, Inc. (MHO) : Free Stock Analysis Report
Veritiv Corporation (VRTV) : Free Stock Analysis Report
Weatherford International PLC (WFRD) : Free Stock Analysis Report
