Zacks Equity Research
6 min read
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Chicago, IL – June 4, 2025 – The stocks in this week’s article are StoneCo Ltd. STNE, Centene Corporation CNC, CVS Health Corporation CVS and Pfizer Inc. PFE.
The second half of 2025 has kicked off on a cautious note. While U.S. stocks opened June in positive territory, geopolitical tensions, particularly between the United States and China, continue to cast a shadow over the global economic outlook. Markets saw modest gains as investors brushed aside fresh accusations between the two superpowers regarding the breakdown of a temporary trade agreement.
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The S&P 500 edged up by 0.41%, closing at 5,935.94, while the Nasdaq Composite showed a stronger performance with a 0.67% increase, settling at 19,242.61. The Dow Jones Industrial Average also inched higher by 35.41 points, or 0.08%, ending the day at 42,305.48.
This backdrop of rising uncertainty makes a compelling case for value investing. When evaluating value stocks, one of the most effective valuation metrics is the Price to Cash Flow (P/CF) ratio. This metric measures the market price of a stock relative to the cash flow the company generates on a per-share basis. A lower P/CF ratio indicates that the stock is trading at a better value, offering strong cash generation potential relative to its price. Here are four companies — StoneCo Ltd., Centene Corporation, CVS Health Corporation and Pfizer Inc.
Questions may arise as to why we are considering the P/CF valuation metric when the most widely used metric is Price/Earnings (or P/E). Well, what makes P/CF stand out is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, reflecting a company’s financial health.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. It is net cash flow that reveals how much money a company is actually generating and how effectively management is putting the same to use.
A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Then again, a negative cash flow implies a decline in the company’s liquidity, which lowers its flexibility to support these moves.
Here are four of the 14 value stocks that qualified the screening:
Stone, a leading provider of financial technology and software solutions, sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 6.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
