I like most games -- even most TV game shows. But there's something truly loathsome about Wall Street's expectations game. Sooner or later, you're going to lose. Marvel Entertainment's (NYSE:MVL) turn came this morning.

The comic-book king reported a 20% increase in revenue and a 79% jump in net income. Publishing revenue rose 31% on brisk sales of comic books and collected works. Yet exactly none of those numbers was good enough for the Street, which was expecting Marvel to earn at least $0.05 per share more on the bottom line. (Get all of the Q2 numbers here.)

For its part, Marvel maintained its full-year guidance of $375 million to $435 million in revenue and $1.30 to $1.55 in per-share earnings. Investors don't appear willing to take management at its word.

And me? I really don't care. I don't think the Street, or most investors, are properly measuring the strength of the underlying business. To do that, you have to look at cash flow. Or, more precisely, adjusted cash from operations, which I first explained here. (Go ahead, click. I'll wait.)

See the difference? Marvel reaps fat cash by licensing its characters to well-heeled firms such as Hasbro (NYSE:HAS), Sony (NYSE:SNE), News Corp. (NYSE:NWS), Lions Gate (NYSE:LGF), and Crocs (NASDAQ:CROX).

So much so that, by my math, Marvel took in roughly $86 million in adjusted cash from operations in Q2 alone -- nearly three times its reported net income. Here's the detail:

Components of Cash From Operations





Reported net income





Depreciation and amortization





Amortization of financing costs





Deferred revenue





Film production costs





Borrowings from film facility





Capital expenditures










Source: Marvel press releases, SEC filings.
* In thousands.

Marvel burned through $34 million in cash to begin the year, making its trailing-12-month total look meeker than it really is.

Better still, the price for that outsized cash generation is about as low as it has ever been. At $23 a share, Marvel trades for just 13.1 times my full-year per-share estimate of $1.76 for adjusted cash from operations. Last year's average multiple was about 10.2. Before that, Marvel hadn't drifted below 11.3, in 2004.

In other words, even though the Street has cast aside Spidey for Harry, Marvel's stock is still cheap. And that's no game.

Face front, true believer! Related Foolishness awaits:

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Fool contributor Tim Beyers owns shares of Marvel. He may buy more when The Motley Fool's disclosure policy allows.