3 More Kings of Cash

A few years ago, I oversaw the acquisition and daily operation of an apartment complex in southern Ontario. My objectives consisted of positioning the business toward prolonged growth and profitability, while also maintaining a conservative financial position. OK, fine; I was basically a landlord who hunted down rent checks every month.

Nevertheless, posting impressive quarter-to-quarter GAAP earnings never became a huge concern of mine. At the end of each year, all I really cared about was having the one thing that I actually needed to keep the apartment running smoothly and growing safely over the long run -- cash.

So why would it be that much different with stocks?

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 free cash flow, as opposed to traditional accounting earnings, is the best gauge of a firm's profitability (or lack thereof). You can learn more about the importance of free cash flow here.

So, with those cash flow lessons deeply engrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three cash-cow favorites of our Motley Fool CAPS community. I'll run a simple screen for companies with free cash flow-to-sales margins above 15% (also known as the Cash King Margin) that our community is overwhelmingly bullish about as well.

Cash Kings rule
Unlike a company such as DexCom (NASDAQ:DXCM) that has the cash gushing out of its corporate windows, these companies have it practically flooding the mail rooms.

So, let's not waste another second. Sound the trumpets! Here's another trio of Cash Kings from CAPS:

As always, don't consider these stocks as formal picks, but rather as 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.

Raising the cash Barr
With an exceptional free cash flow-to-sales margin of more than 20%, Barr Pharmaceuticals takes the honors as this week's most prolific cash king. As the world's third-largest generic drug manufacturer, Barr Pharmaceuticals has the favorable long-term trends (in the form of falling health-care costs), a well-entrenched niche within the female health-care arena, and a whopping portfolio of 550 products to keep its fortress flush with cash.

In addition, CAPS All-Star TMFBreakerJava believes the recent purchase of Pliva -- a Croatia-based drug company specializing in biologics -- will allow Barr to capitalize on growing opportunities in European markets:

"With reform coming to Medicare, generic drug producers may gain an edge over the name brand providers ... This is a well-managed, rapidly growing business with American demographics providing a tailwind. Their recent acquisition also provides an entree to rapidly developing overseas markets, where the population is also aging rapidly. Buy now for outsized returns."

The king's medieval devices
Analog Devices is a free cash-flowing ruler with a diversified customer base and several thousand high-margin products that help make it the world leader in signal processing. Specifically, Analog's technology is used to process real-world phenomena -- like light, sound, and motion -- into signals that are used in a variety of everyday electronics (amplifiers, digital televisions, DVD players, etc.).

Thanks to management's foray into favorable markets and a penchant for shareholder-friendly actions, CAPS All-Star weiwentg thinks Analog will have no problem converting cash into more amplified returns:

"ADI is the market leader in data converters and amplifiers, which account for 40% of worldwide revenue for semiconductors. ADI also specializes in niches where their products can be readily adapted for use in other devices with little reprogramming, but the demand is not high enough for large volume production. This makes for stable demand, and long product cycles -- both good for ADI. ADI has also consistently returned cash to shareholders with dividends and buybacks."

Tibco the (inte)grate
Our last free cash flow king this week is Tibco Software, a pioneer and world leader in the field of business process management (BPM). With an impressive roster of more than 2,200 clients -- including the likes of Qualcomm (NASDAQ:QCOM), Chevron (NYSE:CVX), and FedEx (NYSE:FDX) -- this monarch sits in a grand position to benefit from the estimated double-digit growth of the BPM market.

It's that type of demand for Tibco's integration solutions and global market opportunity that has our CAPS community excited about Tibco's future. jastro, for example, enlightens us with the more important data points:

"Excellent positioning in the 'middleware' industry and TIBCO boasts strong annual sales growth ... TIBCO basically develops software that will integrate the many varying databases that exist in most all corporations (like pulling data existing in accounting and inventory modules to provide a sales management tool). Middleware is necessary to pool the meaningful data from all the garbage-in."

Foolish conclusion
Free cash flow-generating companies like Barr Pharmaceuticals, Analog Devices, and Tibco Software 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, or read how your fellow Fools feel about thousands of different stocks.

Click here to join the forward-thinking CAPS community free of charge.

Be sure to join us next week, when I'll feature three more Cash Kings from CAPS. Until then, may your free cash flow reign supreme.

For more CAPS-style Foolishness:

• 7 Surprising 1-Star Stocks
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Barr Pharmaceuticals and FedEx are Motley Fool Stock Advisor picks. The Fool's disclosure policy is the strict set of rules that always rules Fools.