If achieving profit is a company’s goal, then having a healthy cash flow is most essential for 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.

Admittedly, investors flock to companies that earn profits but even a profitable business can succumb to failure if its cash flow is irregular and eventually file for bankruptcy. However, a company’s resiliency can be fairly judged when its efficacy in generating cash flows is assessed. This is because cash not only shields a company from market mayhem but also indicates that its profits are being channelized in the right direction.

Moreover, analyzing a company’s generating efficiency cash holds more relevance in the current context as the coronavirus pandemic is giving rise to uncertainties in the global economy, market disruptions and dislocations, and liquidity concerns.

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 then it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in 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 individual industry categories.

Here are the five out of the 13 stocks that qualified the screening:

Matson Inc. MATX provides ocean transportation and logistics services. It offers shipping services in Hawaii, Guam, and Micronesia islands, and expedited services from China to Southern California. At present, the stock has a VGM Score of A. The Zacks Consensus Estimate of $4.82 for 2021 earnings has been revised 7.3% upward over the past month.

Piper Sandler Companies PIPR is a focused securities firm dedicated to delivering superior financial advice, investment products and transaction execution within selected sectors of the financial services marketplace. The stock currently flaunts a VGM Score of A. The Zacks Consensus Estimate for current-year earnings has been revised upward to $10.05 from $8.15 in 30 days’ time.

Century Communities, Inc. CCS is a home building and construction company. Its activities comprise land acquisition, development, and entitlements; and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. The stock currently has a VGM Score of A. The Zacks Consensus Estimate for the ongoing-year earnings has moved up to $8.32 from $6.31 in the past 30 days.

Herc Holdings, Inc. HRI is an equipment rental supplier primarily in North America. This company has a VGM Score of A, at present. The Zacks Consensus Estimate of $4.23 for this year’s earnings has moved 26.3% north in 30 days’ time.

P.A.M. Transportation Services, Inc. PTSI is an irregular route, common and contract motor carrier that focuses on automotive parts, consumer goods, such as general retail store merchandise, and products from the manufacturing sector, such as heating and air conditioning units.Currently, the stock has a VGM Score of A. The Zacks Consensus Estimate of $5.30 for 2021 earnings moved 23.3% north in the past month.

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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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Matson, Inc. (MATX) : Free Stock Analysis Report
 
Century Communities, Inc. (CCS) : Free Stock Analysis Report
 
P.A.M. Transportation Services, Inc. (PTSI) : Free Stock Analysis Report
 
Herc Holdings Inc. (HRI) : Free Stock Analysis Report
 
Piper Sandler Companies (PIPR) : Free Stock Analysis Report
 
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