Welcome back to the world of the Cash Kings, where we highlight businesses that generate a healthy dose of free cash flow (FCF). Why is cash flow so important? Because it gives management the opportunity to boost shareholder value through actions like:
- Paying dynasty-building dividends.
- Buying back shares at attractive prices.
- Growing the business organically without having to borrow money or sell shares.
A Fool's guide to free cash
Investing, after all, is about putting money up front today to get more of it in return tomorrow. Here at the Fool, we're firm believers that FCF, instead of traditional accounting earnings, is the best gauge of a firm's health and profitability (or lack thereof).
So, with these cash flow lessons deeply engrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three more cash-flow rulers of our Motley Fool CAPS kingdom.
Unlike The St. Joe Company
Sound the trumpets! Here's another trio of Cash Kings from CAPS:
|
Company |
Cash King |
CAPS |
CAPS |
|---|---|---|---|
|
Ansoft |
32% |
117 |
5 |
|
Comtech Telecommunications |
17% |
108 |
3 |
|
Amerigon |
15% |
217 |
10 |
As always, do not consider these stocks formal picks -- they are suggestions worth further investigation. After all, due diligence is the Fool's way to riches.
But just for starters, here's a quick summary of these cash-throwing kings and how some of their loyal CAPS followers feel about them.
Intelligent design
With an impressive FCF-to-sales margin above 30%, Ansoft takes the honors as this week's most prolific Cash King.
One of the leading electronic design automation (ED) software companies in the world, Ansoft has the capital-light business model, trusted technology (used by engineers to test various electrical devices), and attractive growth prospects to keep its coffers stuffed with cash.
CAPS player rughetta elaborates:
As manufacturers of electronic products keep innovating to stay ahead of competition, new semiconductor designs will be in greater demand leading to increased need for Ansoft products. Unlike many of its competitors, Ansoft leases software to its customers and thus generates income continuously (not only when new versions are written).
King communicator
The next monarch on our list is Comtech Telecommunications, a market leader in three industries: telecom transmission, mobile data communication, and radio frequency microwave amplifiers.
Over the past five years, Comtech has leveraged its highly regarded systems -- used by a roster of blue-chip clients including the U.S. Army and Sony
CAPS contestant Idigmoney communicates more:
Lots of new orders and a very well-run company expected to grow earnings 17% annually for the next five years. Great ROE and ROI now, and over the last 5 years. Very manageable debt level.
Comfy throne
Our last FCF ruler this week is Amerigon, a leading manufacturer of thermoelectric technologies.
Amerigon's principal product, the proprietary cooled/heated Climate Control Seat (CCS), is offered by several major automakers like Ford
CAPS All-Star jclawsonPHN spreads the warmth:
Besides the great financials, this company really knows the direction that it is headed. The best part is that the technology it uses to heat/cool car seats, is only one application. Once this company expands the ways that this technology is used then the company will explode.
The Foolish bottom line
FCF-generating companies such as Ansoft, Comtech Telecommunications, and Amerigon are always among my top candidates to research further. Our Motley Fool CAPS intelligence database is a great place to look for your own Cash Kings and to find out how your fellow Fools feel about thousands of stocks.
Click here to join the forward-thinking CAPS community free of charge.
Be sure to join us next time when I'll feature three more Cash Kings from CAPS. Until then, may your cash flow reign supreme.
