Momentum Ideas: 5 Rallying Stocks With Rising Operating Cashflow

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 |  Includes: AN, ICE, NYX, OPLK, RHB
by: Kapitall

The following is a list of stocks in rally mode, i.e. trading above the 20-day, 50-day and 200-day moving averages. All of these stocks have seen operating cash flow expand faster than net income during the most recent quarter--an encouraging trend that shows the company is effectively converting income into cash flow.

To create this list, we started with a list of 120 rallying stocks. We then crunched the numbers on their financials, and identified a list of companies that have seen a big jump in their operating cash flow relative to net income growth during the most recent quarter. (Note: For this screen, we use the equation Operating Cash Flow = EBIT + Depreciation - Taxes).

Operating cash flow is arguably a better measure of a business's profits than earnings. Given the trends mentioned below, some might think these companies are set to continue their rallies. Do you agree?

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.

Financials data sourced from Google Finance. Short float and performance data sourced from Finviz.

1. Rehabcare Group Inc. (NYSE:RHB): Hospitals Industry. Market cap of $924.03M. The stock is currently 45.23% above its 20-day MA, 56.8% above its 50-day MA, and 64.36% above its 200-day MA. Net Income grew by 132.25% ($15.7M vs. $6.8M y/y), while Operating Cash Flow grew by 231.48% ($32.8M vs. $9.9M y/y) (comparing 3 months ending 2010-09-30 vs. 3 months ending 2009-09-30). Short float at 4.48%, which implies a short ratio of 2.89 days. The stock has gained 30.05% over the last year.

2. Oplink Communications Inc. (NASDAQ:OPLK): Semiconductor Industry. Market cap of $511.1M. The stock is currently 18.97% above its 20-day MA, 30.95% above its 50-day MA, and 52.77% above its 200-day MA. Net Income grew by 170.38% ($8.5M vs. $3.1M y/y), while Operating Cash Flow grew by 181.15% ($8.8M vs. $3.1M y/y) (comparing 13 weeks ending 2010-12-31 vs. 13 weeks ending 2009-12-31). Short float at 3.41%, which implies a short ratio of 2.95 days. The stock has gained 73.97% over the last year.

3. IntercontinentalExchange, Inc. (NYSE:ICE): Diversified Investments Industry. Market cap of $8.65B. The stock is currently 3.24% above its 20-day MA, 3.06% above its 50-day MA, and 7.76% above its 200-day MA. Net Income grew by 10.13% ($96.3M vs. $87.5M y/y), while Operating Cash Flow grew by 15.89% ($136.0M vs. $117.3M y/y) (comparing 3 months ending 2010-09-30 vs. 3 months ending 2009-09-30). Short float at 3%, which implies a short ratio of 3.49 days. The stock has gained 19.57% over the last year.

4. AutoNation Inc. (NYSE:AN): Auto Dealerships Industry. Market cap of $4.82B. The stock is currently 15.88% above its 20-day MA, 20.81% above its 50-day MA, and 42.44% above its 200-day MA. Net Income grew by 9.08% ($67.3M vs. $61.7M y/y), while Operating Cash Flow grew by 13.90% ($113.1M vs. $99.3M y/y) (comparing 3 months ending 2010-12-31 vs. 3 months ending 2009-12-31). Short float at 9.22%, which implies a short ratio of 10.72 days. The stock has gained 81.51% over the last year.

5. NYSE Euronext, Inc. (NYSE:NYX): Diversified Investments Industry. Market cap of $8.72B. The stock is currently 8.36% above its 20-day MA, 14.4% above its 50-day MA, and 20.69% above its 200-day MA. Net Income grew by 2.40% ($128.0M vs. $125.0M y/y), while Operating Cash Flow grew by 6.31% ($219.0M vs. $206.0M y/y) (comparing 3 months ending 2010-09-30 vs. 3 months ending 2009-09-30). Short float at 3.4%, which implies a short ratio of 3.8 days. The stock has gained 47.25% over the last year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.