Energy price swings linked to the Strait of Hormuz are keeping inflation expectations on edge, and that keeps a spotlight on reliable cash generation. When markets worry about rates and growth, investors often start hunting for solid cash flows selling at a discount. That is where the Undervalued Stocks Based On Cash Flows screener comes in. This article highlights three stocks from the screener that stand out on valuation and cash flow quality.

The three stocks discussed below are just a sample, and the full screen surfaced 130 more companies with equally compelling cash flow stories that are not covered here. To go straight to the source and identify your own highest conviction ideas, analyze the Undervalued Stocks Based On Cash Flows screener.

Atlassian (TEAM)

Overview: Atlassian is an Australia headquartered software company that builds tools like Jira, Confluence, Trello and Loom, which help teams plan projects, share knowledge, track work and manage IT services in one connected system. Its newer products, including the Rovo AI assistant, Compass developer hub and security app Guard, aim to make that teamwork more automated, searchable and secure across technical and non technical teams.

Operations: Atlassian generates around $6.6 billion in annual revenue, almost entirely from its Software & Programming segment.

Market Cap: $37.8 billion

Atlassian gives you exposure to a large collaboration software platform that is leaning heavily into cloud delivery and AI tools such as Rovo to deepen usage and open up more premium pricing over time. The company is still loss making, and analysts currently model earnings growth and an improvement in margins, helped by recurring subscription revenue and a broadening user base beyond software developers. Recent results describe cloud and AI adoption, although management has flagged that complex cloud migrations, backloaded billing and potential shifts in developer demand may create variability in cash flow. For investors evaluating software companies with recurring revenue streams, the combination of Atlassian’s current ARR metrics and clearly defined execution risks may warrant further research.

Atlassian’s push into cloud and AI is reshaping its cash flow profile, yet the stock still trades with questions surrounding its path to profitability. Get the full picture in the 3 key rewards and 2 important warning signs

Build your own cash flow shortlist

Atlassian and the two other stocks in this article all came from a single screen, but the real edge is in shaping your own filters around cash flows, valuation and balance sheet strength. Use our flexible Screener to create a shortlist that fits your style, or tap into our curated Investing Ideas for ready made starting points.

Unity Software (U)

Overview: Unity Software runs a platform that helps developers and enterprises build, launch, and grow real time 2D and 3D games and interactive experiences across mobile, PC, console, and extended reality devices, with tools that also support user acquisition, monetization, and live operations.

Operations: Unity generates about US$2.0b in revenue from its Computer Graphics segment, supported by a global customer base across the United States, Greater China, EMEA, and the wider Asia Pacific and Americas regions.

Market Cap: US$18.9b

Unity Software sits at the intersection of game development, real time 3D content and AI driven advertising, which is one reason many investors are watching it closely. The core Create and Grow tools, the Vector ad platform and the coming Unity 7 release give the company multiple ways to turn its large developer base into recurring, higher margin revenue streams. At the same time, Unity remains loss making and is spending heavily on AI and new markets, while facing competition from rival engines and in house tools. For investors using a cash flow focused screener, that mix of improving guidance, portfolio simplification and clear execution risks makes Unity a stock that may warrant closer examination.

Unity Software’s push into real time 3D, AI tools and a broader developer base could be reshaping its long term earnings story, but the crucial details sit inside the analyst forecasts for Unity Software

DLocal (DLO)

Overview: DLocal runs a payments platform that helps global merchants accept and send money in emerging markets, handling cards, bank transfers, cash and other local methods across more than 40 countries. Its services support pay ins, pay outs and platform payments for sectors like e commerce, fintech, streaming, ride hailing and online education.

Operations: DLocal generates about US$1.2b in revenue entirely from its Payment Processing segment, with exposure across Brazil, Mexico, Argentina and other Latin American and non Latin American markets.

Market Cap: US$4.2b

DLocal appears on this cash flow screen because it combines a capital light model and reported returns on equity of 34.7% with exposure to digital payments in emerging markets. Analysts in the market have highlighted earnings growth estimates near 20% a year and price targets above the current share price, while one detailed DCF cited in the market commentary indicates that current pricing may reflect a relatively harsh long term slowdown in free cash flow. That potential opportunity comes with real risks. Investors need to weigh funding that relies entirely on external borrowing, regulatory shocks in key countries and the impact of a young board that is still bedding in after a wave of new appointments.

DLocal’s high reported returns on equity and capital light model suggest the market may be missing something in the current pricing. See how the growth story compares with the cash flow assumptions inside the analyst forecasts for DLocal

Seeking Fresh Alternatives Before They Fly

Fresh ideas do not stay quiet for long. Breakout stories build momentum, laggards keep dropping and under the radar for now opportunities shrink fast. Do not delay, get in early.

• Spot potential future compounders early by scanning a carefully filtered group of quality companies using the 21 high quality undiscovered gems. Act before these stories move onto everyone’s radar.
• Target resilient income while prices still look reasonable by scanning the curated 8 dividend fortresses. Lock in yield potential before renewed enthusiasm chases payouts higher.
• Position ahead of structural demand shifts by reviewing the focused 37 power grid technology and infrastructure stocks. Identify critical infrastructure stocks while attention remains scattered elsewhere.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.