Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Capella Education (Nasdaq: CPLA ) , whose recent revenue and earnings are plotted below.
Hot Prefered Stocks To Watch For 2015: Energie Holdings Inc (ELED)
Energie Holdings Inc, formerly Alas Aviation Corporation, incorporated on June 10, 2013, is in the process of acquiring, assembling and operating passenger airlines, air cargo and related ground service operators. The Company's business model includes purchasing low-scale regional operators then assembles and integrates them as subsidiaries. Corporacion Ygnus Air, S.A. (Cygnus) is a wholly owned subsidiary of the Company. It is engaged in acquisition discussions with several operators throughout Europe and around the world.
Cygnus is an aeronautical company is an integrated provider of air cargo transportation specializing in medium and long-range cargo routes. Cygnus operates a fleet of two Boeing 757-200PCF cargo jets to Europe and Africa. Cygnus has managed multi-plane operations, carrying both freight and passengers throughout Spain, Europe, the Middle East, Africa and the Americas.
Advisors' Opinion:- [By Peter Graham]
Small cap stocks Wi-Fi Wireless Inc (OTCMKTS: WFWL), Energie Holdings Inc (OTCMKTS: ELED) and Trend Exploration, Inc (OTCMKTS: TRDX) surged 47.06%, 25% and 12.50%, respectively, last Friday. However, none of these small cap stocks appear to be the subject of paid promotions or investor relations activities ��something that could be a good thing for investors who are not traders. Keeping that in mind, are these three small cap stocks going to be winners over the long term? Here is a closer look to help you decide on an investing or trading strategy:
5 Best Diversified Bank Stocks To Watch Right Now: Theravance Inc.(THRX)
Theravance, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecule medicines for various therapeutic areas, including respiratory disease, bacterial infections, and central nervous system (CNS)/pain. The company?s key development programs with GlaxoSmithKline (GSK) include the RELOVAIR, a Phase 3 clinical trial program for the treatment of patients with chronic obstructive pulmonary disease (COPD) and/or asthma; the LAMA/LABA program, a Phase 3 COPD program; and the Bifunctional Muscarinic Antagonist-beta2 Agonist (MABA) program, a Phase 2b program for the treatment of COPD, as well as Peripherally Selective Mu-Opioid Receptor Antagonist (P Advisors' Opinion:
- [By Sean Williams]
Finally, Theravance (NASDAQ: THRX ) made waves after announcing that it would be splitting its business into two separate components: Royalty Management, which will focus on drugs currently in the pipeline in collaboration with GlaxoSmithKline, and Theravance BioPharma, which will continue its line of small-molecule rare disease research. Clearly, this gives investors more visibility of where revenue and profit are coming from, but I think it gives Glaxo even more reason to gobble up the Royalty Management segment because now it doesn't have to buy the remaining pipeline of rare disease research.
- [By Sean Williams]
Things are about to getting very exciting for existing shareholders of biopharmaceutical company Theravance (NASDAQ: THRX ) , with the company announcing its first-quarter results after the closing bell and setting a record date of May 15 for its split into two separate trading entities.
- [By Sean Williams]
The buzz in the health-care sector this week has nothing to do with earnings reports and everything to do with an expected PDUFA decision by the FDA on GlaxoSmithKline (NYSE: GSK ) and Theravance's (NASDAQ: THRX ) chronic obstructive pulmonary disease, or COPD, inhaled drug, Breo Ellipta.
- [By Brian Pacampara]
What: Shares of biopharmaceutical company Theravance (NASDAQ: THRX ) climbed as high as 13% today after announcing plans to split into two companies, separating its drugs under development with GlaxoSmithKline from its other operations.
5 Best Diversified Bank Stocks To Watch Right Now: Garmin Ltd.(GRMN)
Garmin Ltd., together with its subsidiaries, designs, develops, manufactures, and markets global positioning system (GPS) enabled products and other navigation, communication, and information products for the automotive/mobile, outdoor, fitness, marine, and general aviation markets worldwide. The company offers a range of automotive navigation products, and various products and applications designed for the mobile GPS market; GPS enabled handheld products for hunters, hikers, geocachers, outdoors enthusiasts, cyclists, and golfers; dog tracking systems; tracker systems; and training assistants for athletes. It also provides handhelds, network products and multifunction displays, fixed-mount GPS/chartplotter products, instruments, fish finders, radars, autopilots, VHF radios, marine networking products, and sounder products. In addition, the company offers GPS-enabled navigation, VHF communications transmitters/receivers, multi-function displays, electronic flight instrumen tation systems, automatic flight control systems, traffic advisory systems and traffic collision avoidance systems, terrain awareness and warning systems, instrument landing system receivers, surveillance products, audio panels, and cockpit datalink systems. The company?s sells its products through a network of independent dealers and distributors, as well as through original equipment manufacturers. Garmin Ltd. was founded in 1990 and is based in Schaffhausen, Switzerland.
Advisors' Opinion:- [By Jayson Derrick]
Analysts at JPMorgan maintained an Underweight rating on Garmin (NASDAQ: GRMN), with a price target raised to $51 from a previous $50. Shares gained 0.10 percent, closing at $57.58.
5 Best Diversified Bank Stocks To Watch Right Now: Invesco Mortgage Capital Inc (IVR)
Invesco Mortgage Capital Inc., incorporated in June 2008, is a real estate investment trust (REIT). The Company is primarily focused on investing in, financing and managing residential and commercial mortgage-backed securities and mortgage loans, which it collectively refers to as its target assets. The Company�� target assets consist of residential mortgage-backed securities (RMBS) for which the United States Government agency, such as the Government National Mortgage Association (Ginnie Mae) or a federally chartered corporation, such as the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) guarantees payments of principal and interest on the securities. It refers to these securities as Agency RMBS. Its Agency RMBS investments include mortgage pass-through securities and may include collateralized mortgage obligations (CMOs). It also invests in RMBS that are not issued or guaranteed by the United States Government agency (non-Agency RMBS), commercial mortgage-backed securities (CMBS) and residential and commercial mortgage loans.
The Company finances its Agency RMBS, non-Agency RMBS and CMBS investments through short-term borrowings structured as repurchase agreements. The Company�� manager is Invesco Advisors Inc. The Company also finances its investments in certain non-Agency RMBS, CMBS and residential and commercial mortgage loans by contributing capital to the Invesco Mortgage Recovery Feeder Fund (Invesco IMRF Fund) that invests in public-private investment funds (PPIF) managed by the Company�� manager. The Company's manager is a wholly owned subsidiary of Invesco Ltd.
Advisors' Opinion:- [By Amanda Alix]
All mREITs are taking it on the chin
The agency crew, led by heavy hitters Annaly Capital (NYSE: NLY ) , American Capital Agency (NASDAQ: AGNC ) , and Armour Residential (NYSE: ARR ) , have all been close to hitting 52-week lows, but the blood-letting hasn't stopped there. Even hybrid mortgage REITs, which also buy some non-agency paper, have plunged, as well. Two Harbors (NYSE: TWO ) , which enjoyed such a nice lift post-earnings about a month ago, recently sunk to new lows, and Invesco Mortgage Capital (NYSE: IVR ) has also slipped, even after its CIO's recent show of faith, making a sizable insider purchase�of stock less than two weeks ago. - [By Amanda Alix]
Analysts at odds over mREITs
Financial analysts have been busy noting the underperformance of mREITs lately, especially since the Fed dropped the QE3 taper bombshell almost two weeks ago -- immediately igniting fears of rising interest rates, which would decrease the value of the trusts' legacy assets, thus dinging book values. The pain hasn't been limited to the stocks mentioned above,� as CYS Investments (NYSE: CYS ) , and even hybrids like Invesco (NYSE: IVR ) , have been on a roller-coaster ride ever since. - [By Sean Williams]
In contrast, non-agency mREITs often have to be more careful with their leverage since loan defaults actively impact their bottom-line profit, and rapidly rising interest rates, such as what we saw over the past few weeks, can trigger MBS and other security sales at a loss. In return for more risk, non-agency securities pay out higher yields. Take, for example, Invesco Mortgage Capital (NYSE: IVR ) , a buyer of agency and non-agency RMBSes, which delivered what might seem like an uninspiring 1.64% net interest margin in the first quarter with a leverage ratio of 6.4. Now compare that to agency-only mREIT Annaly Capital, whose net interest margin fell 80 basis points from the year-ago period in the first quarter to just 0.91%, but with a higher leverage ratio of 6.6.
- [By Monica Wolfe]
Invesco Mortgage Capital (IVR)
President and CEO of Invesco Richard King reported a rather notable insider buy on Aug. 5. The CEO purchased 6,500 shares of company stock at an average price of $15.41 per share. This purchase cost King a total of $100,165. Since this buy, the share price has increased a minor 0.13%. King now holds on to at least 56,545 shares of Invesco Mortgage stock.
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