Course 408: Cyclical Stocks
Does the Company Consistently Generate Positive Cash Flow?
In this course
1 Introduction
2 How Is the Company Doing Now?
3 How Wildly Do Sales and Profits Fluctuate?
4 How Leveraged Is the Balance Sheet?
5 Does the Company Consistently Generate Positive Cash Flow?
6 How Steady Are the Company's Dividends over a Cycle?
7 Is the Firm Diversified Geographically and by Product Line?
8 Is the Long-Term Trend in Sales and Profits Upward?
9 How Has the Stock Performed?
10 How Expensive Is It?
11 How Expensive Is the Company Based on Normalized Earnings?
12 How Does the Price/Sales Ratio Compare with Historical Levels?
13 Conclusion: Get 'Em while They're Cold

During a recession, it is more important for a company to post positive operating cash flows than to post positive earnings: Cash, not accounting profits, pays the bills. It's a good sign if a cyclical's cash flow from operations is positive even in tough years. From the 10-year financial history in its annual report, we learn that United Technologies has indeed posted positive operating cash flows in every year of the 1990s. The company is extremely cyclical, but it generates cash even in slumps.

Next: How Steady Are the Company's Dividends over a Cycle? >>


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