Look Beyond Profit, Bet On 4 Stocks With Increasing Cash Flows

We are in the heart of the current reporting cycle, and crunching profit numbers and evaluating surprises might appear a good option to investors. However, looking beyond profits and evaluating a company’s cash position can be far 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 fact, a dearth of cash flow can compel even a profit-making company to face bankruptcy while meeting its obligations. However, a healthy cash position indicates that profits are being efficiently channelized to the company’s reserves, which not only shield it from market mayhem but also offer flexibility to make decisions, chase potential investments and run its growth engine.

To find this efficiency, one needs to consider a company’s net cash flow figure. 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 then it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in 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 individual industry categories.

Here are four out of eight stocks that qualified the screening:

Schaumburg, IL-based Career Education Corporation (NASDAQ:CECO) is an educational services company committed to providing quality, career-focused learning. The stock has a VGM Score of A. Further, the Zacks Consensus Estimate for 2019 earnings of $1.25 moved up 9.6% over the past month.

Headquartered in Evansville, IN, OneMain Holdings, Inc. (NYSE:OMF) provides consumer finance, and insurance products and services. The stock has a VGM Score of A. The Zacks Consensus Estimate for the current year moved 8.1% upward, over the past 90 days.

Irvine, CA -based Tilly's Inc. (NYSE:TLYS) is a specialty retailer in the action sports industry, selling clothing, shoes and accessories. It has a VGM Score of A. The projected long-term growth rate for the company is 11%. Moreover, the Zacks Consensus Estimate for fiscal 2019 moved 12.2% north to 83 cents over the last 60 days.

Middlefield Banc Corp. (NASDAQ:MBCN) , headquartered in Middlefield, OH, is the bank holding company for The Middlefield Banking Company, which offers a range of banking products and services. The stock has a VGM Score of B. The Zacks Consensus Estimate for the ongoing year improved 1.6% over the last seven days.

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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.

Middlefield Banc Corp. (MBCN): Free Stock Analysis Report

OneMain Holdings, Inc. (OMF): Free Stock Analysis Report

Tilly's, Inc. (TLYS): Free Stock Analysis Report

Career Education Corporation (CECO): Free Stock Analysis Report

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Zacks Investment Research