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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TORSTAR CORP., $0.70, Toronto symbol TS.B, is still a hold.
The company publishes The Toronto Star, Canada’s largest daily newspaper by circulation. Its other daily and weekly papers are spread across Ontario. In 2015, the company acquired 56% of VerticalScope, a private firm that operates over… Read More
This firm’s revenues rose 2.3% during the most-recent quarter, even as COVID-19 raised investor worries about the outlook for it and other long-term-care providers.
The company’s cash flow did dip 7.9% on higher maintenance spending, but occupancy levels remain strong.
EXTENDICARE INC. (Toronto symbol EXE; www.extendicare.com) owns… Read More
The 5.5% jump in cash flow in the most-recent quarter is partly derived from new assets in Montreal.
This REIT has grown steadily by acquisition, with additional properties ready to lift cash flow in the long term.
ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST (Toronto symbol AP.UN; www.alliedreit.com)… Read More
AMAZON.COM INC., $2,890.30, symbol AMZN on Nasdaq, is a buy. The company is one of the world’s largest online retailers. It’s also the third-largest digital ad provider in the U.S. and its Amazon Web Services (AWS) is one of the largest cloud infrastructure service providers… Read More
The company continues to cut operating costs and simplify its distribution networks, which helps it cope with higher raw material costs and other pandemic-related shocks.
Recent acquisitions have added several strong brands to its already impressive portfolio as aging baby boomers switch to more-healthful, premium-priced snacks.
MONDELEZ… Read More
A: Surge Energy, $0.33, symbol SGY on Toronto (Shares outstanding: 335.1 million; Market cap: $110.6 million; www.surgeenergy.ca), produces oil and gas in central and northwestern Alberta and southwestern Saskatchewan. Its output is 86% oil and 14% gas.
How soon oil and gas prices will recover is… Read More
TC ENERGY INC., $57.15, Toronto symbol TRP, is a buy.
The company generates steady cash flow for investors mainly through a 92,600-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Its other operations include 4,900 kilometres of crude oil pipelines… Read More
AZEK COMPANY INC., $30.40, symbol AZEK on New York, is a manufacturer of sustainable building products focused on the outdoor living market. The company was founded in 1983 in Chicago.
Azek’s operates two divisions, TimberTech and Azek Exteriors. TimberTech makes capped polymer and capped composite decking,… Read More
TC ENERGY INC., $59.33, Toronto symbol TRP, is our #1 Income Buy for 2020.
The company generates steady cash flow for investors mainly through a 92,600-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Its other operations include 4,900 kilometres… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a REIT that specializes in medical office buildings, hospitals and healthcare facilities.
Pat likes the company’s growing revenue and cash flow and the way it directly benefits from the world’s aging population. Still,… Read More
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