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4 Stocks with Increasing Cash Flows for this Earnings Season

Parking your hard-earned money in stocks based on top-line growth and increasing profit might appear a good option in the ongoing reporting cycle. But looking beyond the profits and figuring out a company's efficiency in generating cash flows is far more rewarding.

This is because, even a profit-making company can face cash trouble and end up being bankrupt while meeting its obligations. But a company with solid cash flow can endure any market mayhem besides enjoying flexibility in decision making, chasing potential investments and fueling its growth engine.

To find 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 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.

Yet, positive cash flow alone is not sufficient to predict a company's future growth. A company can consistently grow only when this positive cash flow is rising. This is because increasing cash flow implies management's efficiency in regulating its cash movements, generating more money from its business, depending less on outside financing and finally its improving fundamentals.

Therefore, this earnings season and beyond, don't look at profits only before picking stocks. Make sure to look for stocks with dependable and increasing cash flows.

Screening Parameters:

To find out 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 Scoreof 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 the six stocks that made it through the screen:

Gray Television, Inc.GTN is a communications company headquartered in Atlanta, GA. It presently owns and operates television stations as well as digital assets in markets across the U.S. Gray Television has a VGM score of A. Its projected growth rate for earnings per share is 68.2% for 2016.

Also, Gray Television logged in a return of 47.9% over the past three months, which is way better than the 11.5% gain witnessed by the Zacks categorized Broadcast Radio And Television industry.

International Consolidated Airlines Group, S.A.ICAGY is a holding company for British Airways and Iberia engaged in the provision of passenger and cargo transportation services in the U.K., Spain, the U.S. and other countries. The stock has a VGM Score of A. The Zacks Consensus Estimate for 2017 earnings rose 5.7% over the last 60 days.

Also, over the past one month, International Consolidated Airlines' shares have outperformed the Zacks categorized Transportation - Airline industry, recording a return of 4.27% against the industry's uptick of just 1.39%.

Calavo Growers, Inc.CVGW , headquartered in Santa Paula, CA, engages in the procurement and marketing of avocados and other perishable foods as well as the preparation and distribution of processed avocado products. Calavo Growers has a VGM Score of B. The Zacks Consensus Estimate for earnings in fiscal year ending Oct 31, 2017 increased 5.9% to $2.50 per share over the last 60 days.

HOYA CorporationHOCPY is a specialty manufacturer of optical glass. The company's business activities include information technology, eye care, medical and imaging systems. It is headquartered in Tokyo. HOYA Corporation has a VGM Score of B. The Zacks Consensus Estimate for earnings in fiscal year ending Mar 2017 increased 1.9% 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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Hoya Corp. (HOCPY): Get Free Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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