Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message| ()  

Cash-flow analysis is one of the most important aspects of evaluating companies – although earnings can sometimes deviate from economic reality, it is very difficult to manipulate cash holdings. Cash is also what keeps a company afloat.

We screened low-debt stocks, with most recent quarter total debt/total assets below 0.2, for those with impressive cash trends. We first screened for companies seeing high growth in operating cash flow/common equity, comparing the trailing-twelve-month ratio to the company’s five-year average.

We then searched for companies that appear undervalued relative to levered free cash flow (i.e. the free cash flow available after paying interest on outstanding debt), with high ratios of levered free cash flow/enterprise value.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.


(Click to enlarge)

Do you think these companies are generating enough cash? Use this list as a starting-off point for your own analysis.

List sorted by levered free cash flow/enterprise value.

1. American Equity Investment Life Holding Co. (AEL): Life Insurance Industry. Market cap of $699.72M. TTM operating cash flow/common equity at 0.54 vs. 5-year average at 0.41. MRQ total debt/total assets at 0.02. Levered free cash flow at $306.60M vs. enterprise value at $536.65M (LFCF/EV at 57.13%). The stock is a short squeeze candidate, with a short float at 12.45% (equivalent to 13.21 days of average volume). It's been a rough couple of days for the stock, losing 5.16% over the last week.

2. Par Pharmaceutical Companies Inc. (PRX): Drugs Industry. Market cap of $1.13B. TTM operating cash flow/common equity at 0.32 vs. 5-year average at 0.20. MRQ total debt/total assets at 0.00. Levered free cash flow at $248.29M vs. enterprise value at $868.59M (LFCF/EV at 28.59%). The stock is currently stuck in a downtrend, trading 8.16% below its SMA20, 6.89% below its SMA50, and 9.91% below its SMA200. It's been a rough couple of days for the stock, losing 7.91% over the last week.

3. Insperity, Inc. Common Stock (NSP): Staffing & Outsourcing Services Industry. Market cap of $774.91M. TTM operating cash flow/common equity at 0.55 vs. 5-year average at 0.34. MRQ total debt/total assets at 0.00. Levered free cash flow at $105.66M vs. enterprise value at $454.75M (LFCF/EV at 23.23%). Might be undervalued at current levels, with a PEG ratio at 0.94, and P/FCF ratio at 7.3. The stock has gained 14.5% over the last year.

4. Vishay Intertechnology Inc. (VSH): Semiconductor Industry. Market cap of $2.26B. TTM operating cash flow/common equity at 0.36 vs. 5-year average at 0.15. MRQ total debt/total assets at 0.14. Levered free cash flow at $381.36M vs. enterprise value at $1.70B (LFCF/EV at 22.43%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.19). The stock is a short squeeze candidate, with a short float at 9.57% (equivalent to 5.45 days of average volume). It's been a rough couple of days for the stock, losing 8.68% over the last week.

5. Domtar Corporation (UFS): Paper & Paper Products Industry. Market cap of $3.32B. TTM operating cash flow/common equity at 0.30 vs. 5-year average at 0.23. MRQ total debt/total assets at 0.14. Levered free cash flow at $725.38M vs. enterprise value at $3.39B (LFCF/EV at 21.40%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.8). It's been a rough couple of days for the stock, losing 16.11% over the last week.

6. Global Payments Inc. (GPN): Business Services Industry. Market cap of $3.81B. TTM operating cash flow/common equity at 0.69 vs. 5-year average at 0.44. MRQ total debt/total assets at 0.19. Levered free cash flow at $527.55M vs. enterprise value at $3.08B (LFCF/EV at 17.13%). The stock has gained 23.17% over the last year.

7. Teradyne Inc. (TER): Semiconductor Equipment & Materials Industry. Market cap of $2.50B. TTM operating cash flow/common equity at 0.49 vs. 5-year average at 0.28. MRQ total debt/total assets at 0.08. Levered free cash flow at $283.03M vs. enterprise value at $1.80B (LFCF/EV at 15.72%). Might be undervalued at current levels, with a PEG ratio at 0.93, and P/FCF ratio at 5.33. The stock is a short squeeze candidate, with a short float at 11.54% (equivalent to 6.22 days of average volume). It's been a rough couple of days for the stock, losing 5.8% over the last week.

8. AMERIGROUP Corporation (AGP): Health Care Plans Industry. Market cap of $2.38B. TTM operating cash flow/common equity at 0.35 vs. 5-year average at 0.27. MRQ total debt/total assets at 0.10. Levered free cash flow at $327.11M vs. enterprise value at $2.13B (LFCF/EV at 15.36%). The stock is currently stuck in a downtrend, trading 27.87% below its SMA20, 26.05% below its SMA50, and 11.45% below its SMA200. It's been a rough couple of days for the stock, losing 32.72% over the last week.

*Operating cash flow/common equity and total debt/total assets data sourced from Screener.co, levered free cash flow/enterprise value sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 8 Low-Debt Stocks With Impressive Cash-Flow Trends