Markets

4 Stocks With Rising Cash Flows to Enrich Your Portfolio

Investors mostly flock to companies that earn profits, but even a profitable business can succumb to failure if its cash flow is uneven and eventually, file for bankruptcy. However, one can effectively judge a company’s resilience by looking at its efficiency in generating cash flows. This is because cash not only shields a company from market mayhem, but also indicates that profits are being channelized in the right direction.

If, in fact, achieving profit is a company’s goal, then having healthy cash flow is highly essential for its existence, development and success. This is because cash gives a company more flexibility with respect to business decisions and potential investments, as well as the fuel to run its growth engine.

As such, cash indicates a company’s true financial health and holds more relevance in the current context as the coronavirus pandemic is giving rise to uncertainties in the global economy, market disruptions and dislocations, and liquidity concerns.

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 the four stocks that qualified the screening:

PEUGEOT SA PUGOY manufactures and sells passenger cars and light commercial vehicles under the Peugeot, Citroën and DS brands; and automotive equipment, including interior systems, automotive seating, automotive exteriors and emission-control technologies. It also offers retail financing to car customers and wholesale financing to dealer networks. Currently, the stock has a VGM Score of A. The Zacks Consensus Estimate for its ongoing-year earnings has moved up 40.9% in the past month to $3.24.

Griffon Corporation GFF is a diversified management and holding company conducting business through wholly-owned subsidiaries. The stock currently has a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has been revised upward by 4.6% to $1.59 in a week’s time.

Primoris Services Corporation PRIM is a Dallas, TX-based specialty contractor and infrastructure company. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $1.70 for current-year earnings has moved 39.3% north over the past 60 days.

Herc Holdings, Inc. HRI is an equipment rental supplier across North America and operates through its Herc Rentals Inc. subsidiary. The stock has a VGM Score of A. The Zacks Consensus Estimate of $1.80 for this year’s earnings has been revised upward by 70 cents in 60 days’ time.

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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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Primoris Services Corporation (PRIM): Free Stock Analysis Report

Herc Holdings Inc. (HRI): Free Stock Analysis Report

PEUGEOT SA (PUGOY): Free Stock Analysis Report

Griffon Corporation (GFF): Free Stock Analysis 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.

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