Picking profit-making stocks for investments might be popular but not flawless. This is because even a profit-making company can have a deficiency of cash flow and become bankrupt while meeting its obligations. However, one can effectively judge a company’s resilience by looking at its efficiency in generating cash flows.
In this regard, stocks such as Sumitomo Corporation SSUMY, IHI Corporation IHICY, Nomad Foods Limited NOMD, Great Lakes Dredge & Dock Corporation GLDD and Natural Gas Services Group, Inc. NGS are worth buying.
Cash, which is indeed the lifeblood of any business, gives a company the flexibility to make decisions, the means to make potential investments and the fuel to run its growth engine. Moreover, cash shields a company from market turmoil and indicates that profits are being channelized in the right direction.
Moreover, 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 five out of the nine stocks that qualified for the screening:
Sumitomo Corporation, headquartered in Tokyo, Japan, is engaged in multifaceted business activities. It operates as an integrated trading company worldwide. The company sells a variety of domestic products and services, and conducts import, export and trilateral business transactions. It also provides domestic and international business investment and participates in numerous other activities in various industrial sectors around the world.
The Zacks Consensus Estimate for fiscal 2026 earnings per share has improved 6% over the past two months. SSUMY has a VGM Score of A.
IHI Corp., also headquartered in Tokyo, Japan, engages in the design, manufacture, sale, installation, repair, overhaul and maintenance of heavy machinery.
The Zacks Consensus Estimate for fiscal 2026 earnings per share has improved 28.6% over the past two months. IHICY has a VGM Score of A.
Nomad Foods manufactures and distributes frozen foods, primarily in the United Kingdom, Italy, Germany, Sweden, France and Norway.
The consensus estimate for Nomad Foods’ current-year earnings has been revised 4% north over the past two months to $2.07 per share, which calls for a 7.3% increase year over year. NOMD has a VGM Score of A.
Great Lakes Dredge & Dock is the largest provider of dredging services in the United States, conducting business to maintain and deepen shipping channels, reclaim land from the ocean and renourish storm-damaged coastline.
The Zacks Consensus Estimate for Great Lakes Dredge & Dock’s 2025 earnings has been revised upward by 39.1% to 96 cents per share over the past two months. GLDD has a VGM Score of A.
Natural Gas Services Group manufactures, fabricates, sells, rents and services natural gas compressors that enhance the production of natural gas wells.
The Zacks Consensus Estimate for 2025 earnings per share has improved 18.6% over the past two months. NGS 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 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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Sumitomo Corp. (SSUMY): Free Stock Analysis Report Natural Gas Services Group, Inc. (NGS): Free Stock Analysis Report Great Lakes Dredge & Dock Corporation (GLDD): Free Stock Analysis Report Nomad Foods Limited (NOMD): Free Stock Analysis Report IHI CORP (IHICY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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