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Top 5 Stocks with Increasing Cash Flows

While in the heart of the first-quarter earnings season, investors might find it easy to look for profits and surprises to scoop up big gains. But if you pick stocks just because they are making profits, there’s no guarantee that the money is getting channelized to meet their obligations. A profit making company could have cash flow deficiency and that could lead it to filing for bankruptcy.

So for any potential investment over the long term, one must look at a company’s ability to produce cash – the lifeblood of business, the fuel for growth and the cushion amid downturns.

In any business, money flows in and out, but net cash flow indicates how much money the company is actually generating. Having positive cash flows indicates enhanced liquidity, giving the company more means for debt repayment, expenses, dividend payouts, stock buyback and finally reinvestment in business. On the other hand, a negative cash flow implies that a company’s liquid assets are decreasing, resulting in reduced flexibility to support these moves. So putting your hard earned money in stocks with less cash does not make any sense at all.

However, positive cash flows alone are not sufficient to predict a company’s future growth. If cash flow is increasing over time, it implies management’s efficiency in regulating its cash movements, reaping more money from its business, depending less on outside financing and finally its improving fundamentals.

So for stock picks don’t look at profits only. Make sure to look for stocks with dependable and increasing cash flows.

Screening Parameters:

Let’s look for stocks for which cash flow has been increasing over time. For this, we 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 points to a positive trend and growing cash over a period of time.

In addition to this, we have added:

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 nailing down stocks. Importantly, this scoring system helps in picking up the winning stocks in their respective industry categories.

Here are 5 out of 10 stocks that made it through the screen:

Anika Therapeutics Inc.(ANIK)

Emergent BioSolutions, Inc. (EBS)

John Bean Technologies Corporation (JBT)

Norsat International Inc. (NSAT)

Forestar Group Inc. (FOR)

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.

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JOHN BEAN TECH (JBT): Free Stock Analysis Report
 
ANIKA THERAPEUT (ANIK): Free Stock Analysis Report
 
EMERGENT BIOSOL (EBS): Free Stock Analysis Report
 
FORESTAR GROUP (FOR): Free Stock Analysis Report
 
NORSAT INTL INC (NSAT): Free Stock Analysis Report
 
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