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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ENBRIDGE INC., $50.57, Toronto symbol ENB, is now a buy.
The company operates pipelines that pump oil and natural gas from Western Canada to eastern Canada and the U.S. It also distributes gas to consumers in Ontario and Quebec.
Starting with the March 2020 payment, Enbridge will… Read More
CHEVRON CORP., $117.96, New York symbol CVX, remains a buy for investors despite announcing a major writedown.
Through your shares, you tap the operations of the second-largest integrated oil producer in the U.S. by revenue. That’s after ExxonMobil (New York symbol XOM).
Due to weak prices for… Read More
TRANSCONTINENTAL INC., $14.90, Toronto symbol TCL.A, is still a buy for aggressive investors.
In May 2018, Transcontinental paid $1.7 billion for Chicago-based Coveris Americas. That firm makes plastic packaging for consumer and industrial products at plants in the U.S., Canada, the U.K., Ecuador, Guatemala, Mexico, New… Read More
Improved gas prices led to a 19.2% cash flow jump for this company during the most-recent quarter.
A recent $912 million sale of less-productive properties has strengthened its balance sheet, and the company’s planned spending on exploration should boost value for investors.
The stock trades at… Read More
Record shipments of Canadian grain and related products plus higher freight rates led to a 4.3% revenue jump for this company during the most-recent quarter.
A recent initiative to improve efficiency also contributed to an earnings gain of 8.7%, while a cash flow spike bodes well… Read More
ROYAL BANK OF CANADA, $104.99, Toronto symbol RY, is a buy for investors.
The bank shared lower-than-expected quarterly earnings this week with investors. The results reflect a weaker performance by its insurance and capital markets operations, which offset improvements for retail banking and wealth management.
In its… Read More
Diversification, investment quality, and a focus on dividends are key when you’re learning how to start investing in stocks
We continue to think investors will profit most—and with the least risk—by buying shares of well-established companies with strong business prospects and strong positions in healthy industries.
Investors… Read More
Canada’s biggest real estate investment was formed when Canadian REIT completes its merger with Loblaw’s Choice Properties REIT.
The new REIT has 726 properties with a total of 65.5 million square feet in retail, industrial and office space. From the time Canadian REIT was first… Read More
Despite the market volatility of 2019—and their own increased volatility—TSX growth stocks can make excellent long-term investments.
By definition, TSX growth stocks are companies on the Toronto Stock Exchange that have above-average growth prospects. They are firms whose earnings growth has been—or is projected to be—above… Read More
Investing in U.S. real estate from Canada can pay off for some, but it’s riskier than many investors think
Investing in U.S. real estate from Canada is not without risks, and a poor place for any significant portion of your retirement savings. Buying a second home… Read More
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