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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WAJAX CORP., $15.85, is a buy. Through their shares, investors benefit from the company’s (symbol WJX on Toronto) sales and servicing of cranes, forklifts and other heavy equipment. Wajax also provides related parts and systems such as ball bearings, hoses, diesel engines and transmissions.
The company’s… Read More
CANADIAN PACIFIC RAILWAY LTD., $343.08, Toronto symbol CP, is our #1 Conservative Buy for 2020.
Through their shares, investors tap a company shipping freight over a 22,000-kilometre rail network between Montreal and Vancouver. It also links to hubs in the U.S. Midwest and Northeast.
CP was our… Read More
A newly-opened residential complex led to a 2.4% jump in cash flow for this real estate investment trust in the most-recent quarter.
Meanwhile, today’s low interest rates continue to help the REIT reduce its interest expense and to sustain its high-yielding distributions for investor.
The trust’s units… Read More
Asset sales will impact the company’s revenue and earnings in the short term but the proceeds of those sales will let it pay down debt related to a recent acquisition.
Investors will also benefit from legal changes that make it easier for the company to raise… Read More
The best mining investment picks are well-financed or have a partnership with a major that will help them keep developing. That’s just one of our key tips.
Mining is inherently a politically vulnerable business; you can’t move the mine to another country to escape political trends… Read More
TC ENERGY INC., $68.39, Toronto symbol TRP, remains a buy.
The company last increased its quarterly dividend for investors by 8.7% with the April 2019 payment. You now receive $0.75 a share, up from $0.69. The new annual rate of $3.00 yields a high 4.4%.
TC generates… Read More
Pat McKeough responds to many requests from members of his Inner Circle, looking for specific advice on the stock market, investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner… Read More
TSX Blue Chip Stocks Are Key Components Of Successful Investor Portfolios
TSX blue chip stocks are well-established companies with attractive business prospects on the Toronto Stock Exchange, like Bank of Montreal (TSE: BMO), RioCan Real Estate Investment Trust (TSX: REI.UN), and Enbridge (TSE: ENB). Well-established firms… Read More
Stock beta ratings are of limited use, if any, in picking winning stocks.
Stock beta ratings are a commonly used measure stock-market volatility. To calculate a stock beta, a market index like the S&P/TSX Composite Index is assigned a beta of 1.0. The historical volatility of… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a gas-station, convenience store, and a fuel-distribution company active in Canada, the U.S., and the Caribbean.
Pat is impressed by the company’s ability to integrate numerous acquisitions as it keeps growing same-store sales… Read More
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