Investors mostly flock to companies that earn profits, but even a profitable business can succumb to failure if its cash flow is uneven and, eventually, file for bankruptcy. However, one can effectively judge a company’s resilience by looking at its efficiency in generating cash flow. This is because cash not only shields it from any market mayhem but also indicates that its profits are being channeled in the right direction.
In this regard, stocks like Interface, Inc. TILE, QuinStreet, Inc. QNST, Vince Holding Corp. VNCE and OptimumBank Holdings, Inc. OPHC are worth buying.
If achieving profit is a company’s goal, then having a healthy cash flow is highly essential for its existence, development and success. This is because cash gives a company more flexibility with respect to business decisions and potential investments, as well as the fuel to run its growth engine. Cash indicates a company’s true financial health. This holds more relevance in the current context amid uncertainties in the global economy, market disruptions and dislocations, as well as 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, 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 does not merely 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.
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 five-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 seven stocks that qualified the screening:
Interface is a global flooring solution provider, delivering a range of carpet tile and resilient flooring, which it markets under the Interface, nora and FLOR brands for both commercial and residential environments.
The Zacks Consensus Estimate for Interface’s 2026 earnings has been revised upward 11.8% to $2.36 per share in the past 60 days. TILE has a VGM Score of B.
QuinStreet operates digital performance marketing platforms and marketplaces that connect consumers with businesses, with a primary focus on the financial services and home services verticals.
The Zacks Consensus Estimate for QuinStreet’s fiscal 2027 earnings has moved upward by 6.7% to $1.60 per share over the past 60 days. QNST currently has a VGM Score of A.
Vince Holding offers a broad range of women's and men's ready-to-wear, including its signature cashmere sweaters, leather jackets, luxe leggings, dresses, silk and woven tops, denim and footwear.
The Zacks Consensus Estimate for Vince Holding’s fiscal 2027 earnings has jumped upward to $1.21 per share from 57 cents per share over the past 30 days. VNCE has a VGM Score of A.
OptimumBank offers real estate lending and retail banking products to individuals and businesses in Broward, Dade and Palm Beach Counties.
The Zacks Consensus Estimate for the current year’s earnings has improved 3% over the past 30 days. OPHC has a VGM Score of B.
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QuinStreet, Inc. (QNST): Free Stock Analysis Report
Vince Holding Corp. (VNCE): Free Stock Analysis Report
Interface, Inc. (TILE): Free Stock Analysis Report
OptimumBank Holdings, Inc. (OPHC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).