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4 High-Flying Stocks to Bet on With Increasing Cash Flows

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·5-min read
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Cash is a true indicator of a company’s financial health. It provides vitality and strength to a company, offers flexibility to make decisions, the means to make potential investments, the fuel to run its growth engine, and can indeed be referred as the lifeblood of any business.

In this regard, stocks like Marubeni Corporation MARUY, Encore Wire Corporation WIRE, Photronics, Inc. PLAB and Universal Logistics Holdings, Inc. ULH are worth buying.

In fact, even a company generating profits might face bankruptcy while meeting obligations if it is low on cash flow. However, a company with a sturdy cash balance can effectively tide over any market mayhem.

Moreover, with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic, laying a wager on stocks based on their cash-flow generating efficiency looks all the more prudent.

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 13 stocks that qualified the screening:

Marubeni Corporation, based in Tokyo, Japan, purchases, distributes and markets various industrial and consumer goods worldwide. It imports, exports and trades within the Japanese market in food, textiles, materials, pulp and paper, chemicals, energy, metals and mineral resources and transportation machinery. It is also engaged in power projects and infrastructure, plants and industrial machinery, real estate development and construction, finance, logistics and information industries.

The Zacks Consensus Estimate for Marubeni’s earnings for the fiscal year ending March 2023 moved 7.4% north in two months’ time. MARUY currently has a VGM Score of A.

Encore Wire is a low-cost manufacturer of copper electrical building wire and cable. The company is a significant supplier of residential wire for interior electrical wiring in homes, apartments and manufactured housing, as well as building wire for electrical distribution in commercial and industrial buildings.

The Zacks Consensus Estimate for Encore Wire’s 2022 earnings has been revised upward to $19.18 from $10.74 in the past two months. WIRE has a VGM Score of A.

Photronics is engaged in the manufacture of photomask products and services in the United States, Taiwan, Korea, Europe, China and internationally. PLAB offers photomasks that are used in the manufacture of integrated circuits and flat panel displays and to transfer circuit patterns onto semiconductor wafers, FDP substrates, and other types of electrical and optical components.

The Zacks Consensus Estimate for Photronics’ fiscal 2022 earnings has been revised 27.5% upward to $1.90 in a month. PLAB has a VGM Score of B.

Universal Logistics is a provider of customized transportation and logistics solutions. It offers services across its entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.

The Zacks Consensus Estimate of $4.55 for Universal Logistics’ 2022 earnings has moved 40% north in the past two months. ULH has a VGM Score of A.

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.

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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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