Markets

Scoop Up Big Gains With 5 Stocks Having Swelling Cash Flows

Equity markets in the United States enjoyed an uptrend in the first of 2018 as improving economy and corporate tax cuts instilled confidence among consumers of their well-being and promoted healthy capital investments. But as the year progressed, the initial gains were wiped out and the markets entered a correction mode amid volatility in oil prices , trade war with China, rate hikes, tariff impositions on a number of foreign countries as well as softening in the global economy.

Amid these, laying a wager on stocks based on profit numbers appears a popular strategy. But looking beyond profits and figuring out a company's efficiency in generating cash flows can be far more rewarding. This is because cash is the most indispensable factor for any company. It gives strength and vitality, and is the key for its existence, development and success.

Cash is, in fact, the lifeblood of any business and is reflective of a company's true financial health. And why not? Even a company generating profits succumbs to failure and faces bankruptcy while meeting obligations if it has a dearth of cash flow. But one can efficiently tide over any market mayhem if it has the cash to shield it.

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.

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 five out of nine stocks that qualified the screening:

Verso Corp.VRS , based in Miamisburg, OH, produces coated freesheet, coated ground wood, and uncoated super calendared papers and pulp. It serves magazine and catalog publishers, commercial printers, specialty retail merchandisers and paper merchants. The stock has a VGM Score of A. Moreover, the Zacks Consensus Estimate for current-year earnings has increased 14.2% to $3.53 in the last 60 days.

Headquartered in Plano, TX, Diodes IncorporatedDIOD is a manufacturer and supplier of application-specific standard products primarily to the communications, computing, industrial, consumer electronics and automotive markets. The stock has a VGM Score of B. The Zacks Consensus Estimate for 2018 earnings per share of $2.35 has risen 8.3% in the past 60 days.

Charlotte, NC -based EnPro Industries, Inc.NPO is a diversified manufacturer of proprietary engineered products used in critical applications. The stock has a VGM Score of A. The Zacks Consensus Estimate for 2018 earnings has climbed 5.9% to $3.74 over the last 60 days.

Round Rock, TX-based Dell Technologies Inc.DVMT is a provider of information technology solutions. The company has a VGM Score of A. Moreover, the Zacks Consensus Estimate for fiscal year 2019 earnings has increased 2.1% to $6.23 in the last 30 days.

Lisle, IL-based SunCoke Energy, Inc.SXC is a producer of metallurgical coke in the Americas. The company has a VGM Score of B. Moreover, the Zacks Consensus Estimate for 2018 earnings increased 48.3% to 43 cents per share in the last 60 days.

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.

Click here to sign up for a free trial to the Research Wizard today .

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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Dell Technologies Inc. (DVMT): Free Stock Analysis Report

SunCoke Energy, Inc. (SXC): Free Stock Analysis Report

Diodes Incorporated (DIOD): Free Stock Analysis Report

EnPro Industries (NPO): Free Stock Analysis Report

Verso Corporation (VRS): 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.


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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