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Had Jerry Maguire been an investor instead of a fictional sports agent, he might have become famous for yelling, "Show me the cash flow!"

Earnings come and go, and the green-eyeshade types can legally manipulate them to mask a company's true operations. Yet its ability to generate cash -- what comes in the register and goes out the door -- remains the preeminent indicator of a company's worth. In short, cash is king.

Below, we'll look at companies that have proven themselves prodigious generators of free cash flow (FCF) -- the amount of money a company has left over that it could potentially pay to its investors. We'll find companies that have generated compounded free cash flow growth rates exceeding 25% annually over the past five years, then pair them with the opinions of the 135,000-member Motley Fool CAPS investor-intelligence community to see which ones might have the best chance of outperforming the market.


Levered FCF 5-Year CAGR

CAPS Rating
(out of 5)

Marvell Technology



Mechel (NYSE: MTL  )



Norfolk Southern (NYSE: NSC  )



Precision Castparts (NYSE: PCP  )



Research In Motion (Nasdaq: RIMM  )



Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.
FCF = free cash flow. CAGR=compounded annual growth rate.

Generating copious amounts of cash doesn't make a company an automatic buy. But having looked at Enron's cash flows instead of its earnings would have saved many investors a lot of grief. Warren Buffett understands that the value of a company today is calculated by its discounted future cash flows, so use this list as a jumping-off point to dig deeper into the piles of cash.

Precision Castparts makes specialized, highly engineered parts for industries as diverse as medical prostheses, chemical processing, oil and gas, and pollution control. But its biggest revenue generator comes from the aerospace industry (53% of fiscal 2009's revenues, down from 56% in 2008), where Boeing (NYSE: BA  ) and United Technologies (NYSE: UTX  ) are considered key customers. But at 12% of revenues, General Electric (NYSE: GE  ) is its single largest customer, although defense spending brings in another 13% of the total.

Yesterday's announcement that Boeing was going to once again delay the maiden flight of its 787 Dreamliner aircraft sent shares of most Boeing suppliers into a tailspin. Precision Castparts fell as much as 5% following the announcement, and Spirit AeroSystems was off 6%.

While this is the sixth delay, the issue moving it back seems a relatively minor one, or one that could be easily remedied. Although Boeing can't say how long the delay will be, production on the aircraft is not being suspended or even interrupted, and it looks like it shouldn't be a fatal problem, even if management's credibility is suffering stress fractures.

With power generation accounting for a quarter of Precision's sales in 2009, and other general industrial sales rounding out the remaining 20% or so, the maker of specialty metal parts, forgings, and fasteners should be able to continue generating sufficient cash. Its backlog of orders remains strong; typically from large, well-financed customers, for which it continues to win market share.

Admittedly, the repeated delays in Boeing's Dreamliner do strain credulity, and investors like CAPS member wundermichl wonder just how well Precision can continue to perform in the face of an airline industry that is flying in extreme turbulence:

I can not imagine how the aerospace industry will perform well in the next 1-2 years. Boeing will fill orders on the "Dreamliner" in 2010? Wasn't that supposed to happen in 2005, 2006, 2007, 2008 and 2009 already? Hmmm....

Surprisingly, though, the Aerospace & Defense sector has been one of the top five sectors in CAPS, jumping more than 24% over the past month.

Follow the money
While these stocks have left a trail of dollars, it pays to start your own research on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think will continue to be rolling in the dough.

Precision Castparts is a Motley Fool Stock Advisor selection. Spirit AeroSystems is a Motley Fool Hidden Gems recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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