We are already into the second-quarter reporting cycle, and stocks with top-line growth and increasing profit numbers might be popular choices. Moreover, choosing stocks based on a company’s efficiency in generating cash flows can be far more rewarding.
In this regard, stocks such as Catalyst Pharmaceuticals, Inc. CPRX, SunOpta Inc. STKL, Gambling.com Group Limited GAMB and Orion Group Holdings, Inc. ORN are worth buying.
This is because even a profit-making company can have a dearth of cash flow and become bankrupt while meeting its obligations if its profits are not channeled in the right direction. However, a company can effectively weather any market mayhem if it has a solid cash position, as that lends a company the flexibility to make decisions, the means to invest and the fuel to run its growth engine. It is indeed the key to a company’s existence, development and success and reveals its true financial health.
Furthermore, with uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns, analyzing a company’s cash-generating efficiency holds more relevance.
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 six stocks that qualified for the screening:
Catalyst Pharmaceuticals is a commercial-stage biopharmaceutical company focused on the development and commercialization of therapies targeting rare and difficult-to-treat diseases.
The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ 2025 earnings has been revised upward by 2 cents to $2.25 per share in the past 60 days. CPRX has a VGM Score of A.
SunOpta provides tailored supply-chain innovations and solutions to leading brands, retailers and foodservice companies, spanning a wide range of beverages, broths and nutritious snack offerings.
The Zacks Consensus Estimate for SunOpta’s 2025 EPS is pegged at 18 cents, suggesting a surge of 63.6% from the year-ago reported figure. STKL has a VGM Score of B.
Gambling.com offers marketing and sports data services to the global online gambling industry. It supports iGaming and sports betting operators in acquiring customers across 19 national markets and more than ten languages through a portfolio of leading branded websites like Gambling.com, Bookies.com and Casinos.com.
The Zacks Consensus Estimate for Gambling.com’s 2025 earnings has been revised upward by a cent to $1.07 per share in the past 30 days. GAMB has a VGM Score of A.
Orion Group is a construction company that provides services on and off the water primarily in the continental United States, Alaska, Canada and the Caribbean Basin. The company's operating segment consists of the heavy civil marine construction segment and the commercial concrete segment.
The Zacks Consensus Estimate for Orion Group’s 2025 earnings has been revised upward by a cent to 17 cents per share over the past seven days. ORN 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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SunOpta, Inc. (STKL): Free Stock Analysis Report Orion Group Holdings, Inc. (ORN): Free Stock Analysis Report Catalyst Pharmaceuticals, Inc. (CPRX): Free Stock Analysis Report Gambling.com Group Limited (GAMB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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