Crunching profit numbers and evaluating surprises might appear as a good option in the ongoing reporting cycle but these do not ensure that the profits are being efficiently channeled to the reserves for funding growth. This is because even a profit-making company can have a deficiency of cash flow and go bankrupt while meeting its obligations.
Therefore, one must look at a company’s proficiency in generating cash flows before investing in the right stocks. This is because cash is the most indispensable factor for any company. It gives strength and vitality and is the key to its existence, development and success. This view is particularly relevant in light of the ongoing global economic uncertainty, coupled with market disruptions and dislocations.
In this regard, stocks like DXP Enterprises, Inc. DXPE, Photronics, Inc. PLAB, GigaCloud Technology Inc. GCT and Mission Produce, Inc. AVO are worth buying.
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.
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 11 stocks that qualified for the screening:
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 11.7% upward over the past two months. DXPE has a VGM Score of A.
Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high-precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors and flat panel displays, photomasks are used to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, a variety of flat panel displays and, to a lesser extent, other types of electrical and optical components.
The Zacks Consensus Estimate for Photronics’ fiscal 2025 earnings has moved up by 4.5% to $2.30 per share in the past two months. PLAB currently has a VGM Score of A.
GigaCloud, headquartered in El Monte, CA, is a pioneer of global end-to-end B2B e-commerce solutions for large parcel merchandise. Its platform combines product discovery, payments, and messaging portals, empowering suppliers with channel diversification while offering resellers access to thousands of products accompanied by a full logistics solution.
The Zacks Consensus Estimate for GCT’s 2025 earnings per share has moved up marginally over the past two months to $3.38. GigaCloud has a VGM Score of A.
Mission Produce Inc., based in Oxnard, CA, sources, produces, packs, distributes and markets avocados principally in the United States and internationally. The company serves retail, wholesale and foodservice customers.
The Zacks Consensus Estimate for fiscal 2025 earnings per share has improved 44.8% over the past two months. AVO 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.
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