5 Stocks Backed By Increasing Cash Flows To Buy Now

Crunching profit numbers and evaluating surprises might seem appropriate right after an earnings season but these do not ensure that the profits are being efficiently channeled to the reserves to fund future growth. Because, even a profit-making company can have a deficiency of cash flow and might go bankrupt while meeting its obligations.

Therefore, to ensure investing in the right stocks, one must look at a company’s proficiency in generating cash flows. This is because cash is indeed the lifeblood of any business. Its gives a company the flexibility to make decisions, the means to make potential investments and the fuel to run the growth engine. Cash also shields a company from market turmoil.

Cash moves in and out of any business, but it is net cash flow that shows how much money the company is actually generating. A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. On the other hand, a negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.

A company can competently grow only when this positive cash flow is rising, as increasing cash flow indicates management’s efficiency in generating more cash from its business.

Therefore, for picking stocks don’t go for profits only. Make sure to look for stocks with dependable and increasing cash flows.

Screening Parameters:

To find out stocks that have seen increasing cash flow over time, we ran the screen for stocks whose cash flow in the latest reported quarter is 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 the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

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 screens out the 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 the winning stocks in their respective industry categories.

Here are five out of 12 stocks that made it through the screen:

Delta Apparel Inc. ( (NYSE:DLA) )

Fresh Del Monte Produce Inc. ( (NYSE:FDP) )

AMN Healthcare Services Inc. ( (NYSE:AHS) )

KT Corp. ( (NYSE:KT) )

HFF, Inc. ( (NYSE:HF) )

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

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: http://www.zacks.com/performance.

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »