Yahoo Finance Look Beyond Earnings, Bet on 4 Stocks With Rising Cash Flows
We are in the busiest week of this reporting cycle, and putting your hard-earned money in stocks with high profits and earnings surprises is trendy. But looking beyond profits and figuring out whether they are being efficiently channeled to the company’s reserves can be a lot more rewarding. This is because even though profit is a company’s goal, cash is its lifeblood for existence and a measure of resiliency.
In this regard, stocks like Deutsche Telekom AG DTEGY, Arcos Dorados Holdings Inc. ARCO, Veritiv Corporation VRTV and The Andersons, Inc. ANDE are worth buying.
In fact, a profit-making company can have a dearth of cash flow and might go bankrupt while meeting its obligations. But a company with a healthy cash level not only enjoys the flexibility to make decisions, chase potential investments and run its growth engine but also weathers any market mayhem. Therefore, looking at a company’s ability to produce cash is important in terms of protecting your money in addition to multiplying it.
Analyzing a company’s cash-generating efficiency has become more relevant amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or health crisis.
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 19 stocks that qualified the screening:
Deutsche Telekom AG, headquartered in Bonn, Germany, is Europe's largest communications company and one of the largest communications carriers worldwide.
The Zacks Consensus Estimate for 2023 earnings has improved 3.2% over the past month. Currently, DTEGY has a VGM Score of B.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided into Brazil, North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
The Zacks Consensus Estimate for 2023 earnings has improved 3% over the past month to 68 cents per share. Currently, ARCO 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 0.8% in the past week to $19.50 per share. Currently, VRTV carries a VGM Score of A.
The Andersons is a regional grain merchandiser with diversified businesses in agriculture, plant nutrient formulation and distribution, turf product production, railcar marketing and general merchandise retailing that generate revenues.
The Zacks Consensus Estimate for 2023 earnings has improved 26.2% over the past two months to $2.94. Currently, ANDE 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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The Andersons, Inc. (ANDE) : Free Stock Analysis Report
Deutsche Telekom AG (DTEGY) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Veritiv Corporation (VRTV) : Free Stock Analysis Report
