Solid Cash-Flow Growth Makes These 4 Stocks Worth Buying Now
Cash is the lifeblood of any business. It offers strength, vitality and flexibility to make investment decisions, as well as the fuel to run its growth engine. Moreover, cash shields a company from market turmoil and indicates that profits are being channelized in the right direction.
In this regard, stocks like Marubeni Corp. MARUY, PDC Energy, Inc. PDCE, Arcos Dorados Holdings Inc. ARCO and Tecnoglass Inc. TGLS are worth buying.
In fact, one must go beyond profit numbers and look at a company’s efficiency in generating cash flows to invest in the right stocks. This is because even a profit-making company can face a dearth of cash flow and fail to meet its obligations. However, a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed.
Analyzing a company’s cash-generating efficiency also holds more relevance in the current context with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions or the pandemic.
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.
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 16 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 13.4% north in a week’s time. The stock currently has a VGM Score of B.
PDC Energy, Inc., headquartered in Denver, CO, is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.
The Zacks Consensus Estimate for PDC Energy’s 2022 earnings has moved 8.1% north to $17.52 over the past month. PDCE currently carries a VGM Score of A.
Arcos Dorados operates as a franchisee of McDonald's, with its operations divided in Brazil, the North Latin America division, South Latin America and the Caribbean division. It also runs quick-service restaurants in Latin America and the Caribbean.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 earnings has been revised upward by a penny to 40 cents per share in the past month. ARCO currently sports a VGM Score of A.
Tecnoglass is a leading manufacturer of architectural glass, windows and associated aluminum products serving the global residential and commercial end markets.
The Zacks Consensus Estimate for Tecnoglass’s 2022 earnings has been revised 5.7% upward to $2.24 in a month. TGLS 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.
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PDC Energy, Inc. (PDCE) : Free Stock Analysis Report
Marubeni Corp. (MARUY) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Tecnoglass Inc. (TGLS) : Free Stock Analysis Report
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