Crunching profit numbers and evaluating surprises might be the preferred methods for scooping up big gains in the Q1 earnings season. However, looking beyond profits and assessing a company’s cash position can be far more rewarding because it indicates the company’s true financial health.

In this regard, stocks like Griffon Corporation GFF, DXP Enterprises, Inc. DXPE, Willdan Group, Inc. WLDN and Kingstone Companies, Inc. KINS are worth buying.

This is because although profit is a company’s goal, cash is the lifeblood of its existence, development and success, and indeed a measure of its resilience. Even a profitable business can fail if its cash flow is uneven and eventually file for bankruptcy. Nevertheless, a company with a healthy cash position can effectively tide over any market mayhem and still be on its growth curve, along with enjoying the flexibility to make decisions, chase potential investments and run its growth engine.

Furthermore, with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns resulting from geopolitical tensions, analyzing a company’s cash-generating efficiency holds more relevance in the current context. 

To figure 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 a company is actually generating.

If a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the 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 industry categories.

Here are four out of the 13 stocks that qualified for the screening:

Griffon Corp., a diversified management and holding company, operates through wholly owned subsidiaries. It provides consumer and professional, as well as home and building products.

The Zacks Consensus Estimate for Griffon Corp.’s fiscal 2025 earnings per share has been revised marginally upward in the past month. GFF has a VGM Score of A.

DXP Enterprises provides innovative pumping solutions, supply-chain services, and maintenance, repair, operating and production services.

The consensus estimate for DXP Enterprises’ current-year earnings has been revised 22.5% upward over the past month. DXPE has a VGM Score of A.

Willdan Group is a provider of professional technical and consulting services to utilities, private industry and public agencies at all levels of government. WLDN enables its clients to realize cost and energy savings by providing a wide range of specialized services.

The Zacks Consensus Estimate for Willdan Group’s current-year earnings has improved 17% over the past two months to $2.75. WLDN has a VGM Score of B.

Kingstone Companies, through its subsidiary, provides property and casualty insurance products to individuals in the United States. 

The Zacks Consensus Estimate for 2025 earnings per share has improved 5.6% over the past month to $1.90. KINS has a VGM Score of A.

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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.

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DXP Enterprises, Inc. (DXPE) : Free Stock Analysis Report

Willdan Group, Inc. (WLDN) : Free Stock Analysis Report

Kingstone Companies, Inc (KINS) : Free Stock Analysis Report

Griffon Corporation (GFF) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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