6 Stocks Riding High On Increasing Cash Flow To Buy Now

If profit is a company’s goal then cash is the lifeblood for its existence, development and success. Cash gives a company more flexibility with respect to business decisions and potential investments as well as the fuel to run its growth engine.

In fact, even a profit-making company can have a deficiency of cash flow and face bankruptcy while meeting its obligations. But one can effectively judge a company’s resilience by looking at its efficiency in generating cash flows. Because cash not only shields a company from market mayhem but also indicates that profits are being channelized in the right direction.

To find 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 the 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.

Yet, positive cash flow alone is not adequate to predict a company’s future growth. A company can consistently grow only when this positive cash flow is rising. Increasing cash flow indicates management’s efficiency in regulating its cash movements, less dependency on outside financing for running its business and finally its improving fundamentals.

Therefore, while picking stocks look beyond profits and select companies 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 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 the market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.

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