If achieving profit is a company’s goal, then having healthy cash flow is essential to its existence, development and success. This is because cash offers strength, vitality and flexibility to make investment decisions as well as the fuel to run its growth engine.
In this regard, stocks like Photronics, Inc. PLAB, DXP Enterprises, Inc. DXPE, Climb Global Solutions, Inc. CLMB and GeoPark Limited GPRK are worth buying.
Investors are naturally drawn to profit-generating companies, but even a profitable business can falter and face bankruptcy if its cash flow is inconsistent. A company’s true resilience lies in its ability to generate steady cash flows, as this not only safeguards it against market turmoil but also demonstrates that its profits are being effectively utilized. This perspective is especially pertinent given the current climate of global economic uncertainty, market disruptions and dislocations.
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 16 stocks that qualified for the screening:
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 month. PLAB currently 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 11.7% upward over the past two months. DXPE has a VGM Score of A.
Climb Global Solutions is a value-added IT distribution and solutions company specializing in emerging and disruptive technologies. The company provides IT distribution and solutions for emerging companies, principally in the Security, Data Management, Connectivity, Storage & HCI, Virtualization & Cloud, and Software & ALM industries.
The Zacks Consensus Estimate for the current year has improved 26.7% over the past two months. CLMB has a VGM Score of A.
GeoPark Limited, based in Colombia, is an independent oil and gas explorer, operator and consolidator. It has operations across Latin America.
The Zacks Consensus Estimate for GeoPark’s 2025 earnings per share has been revised 13.5% north over the past two months to $4.36. GPRK 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.
