Cash is the lifeblood of any business. It offers the flexibility to make decisions, the means to make potential investments and the fuel to run its engine of growth. In fact, it is key to a company’s existence, development and success and indicates its true financial health.
In this regard, stocks like Deutsche Telekom AG DTEGY, Banco do Brasil SA BDORY, Encore Wire Corporation WIRE and Tecnoglass Inc. TGLS are worth buying.
Before investing in the right stocks, one must look beyond earnings numbers and look at a company’s efficiency at generating cash flows. Even a profitable business can fail when its cash flow is uneven and eventually file for bankruptcy. However, one can effectively assess a company’s resilience by looking at its efficiency in generating cash flows. This is because cash not only protects it from market chaos, but also indicates profits are directed in the right direction.
In particular, uncertainties in the global economy, market disruptions and upheavals, as well as liquidity concerns due to geopolitical tensions or the health crisis have restored the relevance of analyzing a company’s cash generation efficiency.
To determine this efficiency, one must look at a company’s net cash flow. While cash flows in and out of every business, net cash flow explains how much money a business actually makes.
When a company experiences positive cash flow, it means an increase in its cash position, which enables it to meet debt obligations, pay expenses, reinvest in the business, weather downturns, and ultimately return wealth to shareholders. On the other hand, negative cash flow indicates a decrease in the company’s liquidity, which in turn reduces its flexibility to support these moves.
However, a positive cash flow alone does not ensure the future growth of a company. In order to ride the growth curve, a company must have increasing cash flow, as this indicates management’s efficiency in regulating its cash movements and less reliance on debt financing to operate the business.
So stay tuned to the screen below to bet on stocks with increasing cash flows.
Screening parameters:
To find stocks that have shown increasing cash flow over time, we looked for those whose Cash flow for the most recent quarter was at least equal to or greater than the five year average cash flow per common share. This implies a positive trend and increasing liquidity over a period of time.
We have decided to do this:
Zack’s Rank 1: Regardless of whether market conditions are good or bad, stocks with a Zacks rank of #1 (Strong Buy) have a proven history of outperforming. You can see the full list of today’s Zacks #1 Rank stocks can be found here.
Average broker rating 1: This indicates that the brokers are also very hopeful about the future development of the company.
Current price greater than or equal to $5: This sorts out low-priced stocks.
VGM score of B or better: This score is also a great help when selecting stocks. Importantly, this rating system helps select the winning stocks in their industry categories.
Here are our four picks from the 17 stocks that qualified for screening:
Deutsche Telekom AGheadquartered in Bonn, Germany, is Europe’s largest communications company and one of the largest communications carriers worldwide.
The Zacks consensus estimate for 2023 earnings has improved by 1.1% over the past month. DTEGY currently carries a VGM score of A.
Banco do Brasil SA provides retail and corporate banking services in Brazil and internationally. Services offered include consumer, commercial and agribusiness credit, wealth management, foreign exchange, insurance, lease financing and internet banking services.
The Zacks Consensus estimate for Banco do Brasil’s earnings in 2023 was revised upwards by 8.9% over the past month. Banco do Brasil has an impressive growth rate of 10% for the next five years. Currently, BDORY has a VGM score of A.
encore wire is a cost-effective copper electrical wire and cable manufacturer. The company is a major supplier of household cables for internal electrical wiring in houses, apartments and prefabricated houses, as well as construction cables for electrical distribution in commercial and industrial buildings.
The Zacks Consensus estimate for Encore Wire’s 2023 earnings was revised up 28.1% last month to $19.76. WIRE has a VGM score of A.
techno glass is a leading manufacturer of architectural glass, windows and related aluminum products serving the global residential and commercial end markets.
The Zacks Consensus estimate for Tecnoglass’ 2023 earnings was revised up 10.1% over the past week to $3.83. TGLS has a VGM score of B.
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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 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 mentioned in this material.
Disclosure: Performance information on Zacks portfolios and strategies is available at: https://www.zacks.com/performance.
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Tecnoglass Inc. (TGLS): Free Stock Research Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
