Cash flow is a company’s operating inflow of cash minus its outflow of cash. It’s calculated by adding net income plus non-cash charges such as depreciation, depletion and amortization. Simply put, it’s earnings without taking into account non-cash charges such as depreciation, depletion and the write-off of intangible assets over time.
Cash flow is particularly useful in valuing companies in industries in which depreciation and depletion charges are based on the historical value of assets instead of current values-industries such as oil and gas and real estate. Note though, that as with any financial ratio or number, you have to look at it in context with many other factors. That’s not to say that there won’t be surprises that affect every company in a particular industry. But well-established stocks have the asset size and the financial clout-including solid balance sheets and strong cash flow-to weather market downturns or changing industry conditions.
In summary, cash flow is in many ways a better measure of a company’s performance than earnings. While reported earnings are subject to accounting interpretation and can be restated in later years, cash flow is a measure of the cash flowing into a company right now less cash outlays.
Investors should always seek out information about cash flow when analysing a stock-but you should also keep TSI Network’s three-part Successful Investor philosophy in mind:
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J.P. MORGAN CHASE & CO., $120.56, New York symbol JPM, is the largest banking firm in the U.S., with total assets of $2.76 trillion as of September 30, 2019.
Starting with the October 31, 2019, payment, the bank will increase its quarterly dividend by 12.5%. Investors… Read More
A: NICE Ltd. (ADR), $152.79, symbol NICE on Nasdaq (ADRs outstanding: 62.3 billion; Market cap: $9.6 billion; www.nice.com), is an Israel-based company, specializing in telephone voice recording, data security and surveillance, as well as systems that analyze this recorded data. That “big data” includes structured and… Read More
A: Lloyds Banking Group plc (ADR), $3.07, symbol LYG on New York (ADRs outstanding: 17.6 billion; Market cap: $50.6 billion; www.lloydsbankinggroup.com) offers a range of banking and financial services through its subsidiaries and associated companies. More specifically, it provides retail banking, mortgages, pensions, asset management, insurance… Read More
Here’s the text of the most-recent letter I sent to our Portfolio Management clients in August.
“In recent years, I’ve mentioned that the world is going through a gigantic monetary experiment. At first, I was referring to the “quantitative easing” that the U.S. Federal Reserve and… Read More
Non-essential property sales led to a 10% jump in cash flow for this company during the most-recent quarter.
A recently completed strategic initiative has helped the company lower costs and realize better market value.
The stock trades at 17.5 times the company’s 2020 cash flow forecast.
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DREAM OFFICE… Read More
Finding the best low-risk stocks includes zeroing in on factors like hidden assets, as well as a history of profits, dividends, and industry dominance
The best low-risk stocks typically make for safer investments. And for conservative investors, that means focusing on investing in high-quality stocks—including those… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a company that holds interests in 285 properties across Canada, including strip plazas, standalone small-box stores and enclosed shopping centres.
Pat likes the REIT’s distribution, now yielding 6.2% and paid out from a.. Read More
Avoid a strict value company vs growth company strategy and instead focus on high-quality examples of each investment type for the biggest portfolio gains
How do you compare a value company vs growth company—and which should be in your portfolio? If you invest as we advise—by… Read More
A: TransAlta Renewables, $13.83, symbol RNW on Toronto (Shares outstanding: 264.3 million; Market cap: $3.7 billion; www.transaltarenewables.com), is one of the largest generators of wind power in Canada and is among the country’s largest publicly traded renewable power companies.
TransAlta Renewables owns 21 wind farms, 13 hydroelectric… Read More
A: Power Financial, $29.30, symbol PWF on Toronto (Shares outstanding: 664.1 million; Market cap: $19.8 billion; www.powerfinancial.com), holds majority interests in Great-West Lifeco, symbol GWO on Toronto, and IGM Financial, symbol IGM on Toronto.
We currently see Great-West as a hold and IGM Financial as a buy… Read More
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