Long-term value investments: 5 stocks generating positive cash flow with market potential

Identifying companies with positive cash flow can lead to long-term wealth creation. Here are five stocks that have delivered positive cash flows.

Cash flow assesses a company's liquidity and business sustainability. Operating cash flow (OCF) measures a company's ability to generate revenue from core business activities, while free cash flow (FCF) signifies the cash available for dividends, investments, and debt reduction. Companies with positive cash flow demonstrate strong core operations, sustainable business practices, and the potential to create long-term shareholder value.

• Free cash flow is crucial for expansion, dividends, and financial strength.

• Stocks with positive cash flow deliver superior returns over the long term.

• Five tracked firms are offering upside potential amid the market rally.

• Names include SIS, UPL, Gujarat State Petronet, Transport Corporation, and Hindalco Industries.

Top 5 companies with positive cash flow

1. SIS - SIS displayed exceptional performance with 11.1% year-on-year revenue growth and an 8.5% increase in net profit. Their focus on margin improvement and cost control strengthened their India Security business, while their innovative cash logistics solutions thrived. As a beneficiary of labour market liberalisation, SIS is well-positioned for long-term growth.

2. UPL - UPL maintains a strong business profile with a diverse geographical presence and an extensive product portfolio. Their strategic plan to increase high-margin products to 50% by 2026–27, along with a focus on sustainable solutions, indicates a potential volume revival in the second half of 2023–24.

3. Gujarat State Petronet - This natural gas leader experienced a robust 17% sequential volume jump in the June quarter. Their leadership position in the natural gas transmission sector, coupled with investments and expansion plans beyond Gujarat, positions them well for long-term growth as gas demand increases in north India.
   
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4. Transport Corporation of India - This logistics maestro demonstrated strong growth in its business divisions, capitalising on the emerging vertical solutions trend. Their focus on high-margin LTL services and tech-enabled transportation solutions sets the stage for significant gains in freight and supply chain divisions, while the high-margin seaways division sustains growth with planned capacity expansion.

5. Hindalco Industries - Despite recent headwinds, analysts are optimistic about Hindalco's long-term growth. With a focus on value-added products, backward integration, and increasing domestic demand for aluminium and copper, Hindalco is poised for an upswing. The expected rebound of Novelis after weathering destocking headwinds in Asian markets adds to their positive outlook.

The takeaway

Investing wisely in companies with positive cash flow can lead to superior returns, as they tend to create more wealth and attract more investor interest. However, consider other financial indicators to make well-informed decisions.

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.