Yahoo Finance Forget Profit, Bet on 4 Stocks With Increasing Cash Flows
If achieving profit is a company’s goal, then having healthy cash flow is essential to its existence, development and success. This is because cash offers strength, vitality and flexibility to make investment decisions as well as the fuel to run the growth engine.
In this regard, stocks like Banco do Brasil S.A. BDORY, Marubeni Corporation MARUY, Weatherford International plc WFRD and Encore Wire Corporation WIRE are worth buying.
Investors flock to companies that earn profits but even a profitable business can succumb to failure if its cash flow is irregular and eventually files for bankruptcy. But a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed. This is because cash not only shields a company from market mayhem but also indicates that profits are being channelized in the right direction.
In addition, analyzing a company’s cash-generating efficiency has indeed become more relevant amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the 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 15 stocks that qualified the screening:
Banco do Brasil S.A provides retail and commercial banking services in Brazil and internationally. The services offered include consumer, commercial and agribusiness loans, asset management, foreign exchange, insurance, lease financing and Internet-banking services.
The Zacks Consensus Estimate for Banco do Brasil’s 2023 earnings has been revised 3.2% upward in the past month. Banco do Brasil has an impressive growth rate of 17.8% for the next five years. Currently, BDORY has a VGM Score of A.
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, and finance, logistics and information industry.
The Zacks Consensus Estimate for Marubeni’s earnings for the fiscal year ending March 2023 has moved 7.7% north in the past month. MARUY currently has a VGM Score of A.
Weatherford International provides oil field services and equipment. The company offers drilling solutions, gas well unloading, restoration and other related activities.
The Zacks Consensus Estimate for 2023 earnings has improved 44.6% over the past month. Currently, WFRD carries 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 2023 earnings has been revised 28.1% upward to $19.76 in the past week. WIRE 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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Banco Do Brasil SA (BDORY) : Free Stock Analysis Report
Marubeni Corp. (MARUY) : Free Stock Analysis Report
Encore Wire Corporation (WIRE) : Free Stock Analysis Report
Weatherford International PLC (WFRD) : Free Stock Analysis Report
