Welcome back to the world of the Cash Kings, where we highlight businesses that generate a healthy dose of free cash flow. Why is cash flow so important? Because it gives management the opportunity to boost shareholder value through actions like:

1. Paying dynasty-building dividends.  

2. Buying back shares at attractive prices.

3. 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 in order 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 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 Hovnanian Enterprises -- which is a cash-burning company that those in CAPS overwhelmingly dislike -- these are businesses with free cash flow-to-sales margins above 15% (also known as the Cash King Margin) that our community is pretty bullish about.

So, sound the trumpets! Here's another trio of Cash Kings from CAPS:


Cash King Margin (trailing 12 months)

CAPS Bulls

CAPS Bears

American Tower (NYSE:AMT)




Cephalon (NASDAQ:CEPH)




CommVault Systems (NASDAQ:CVLT)




As always, don't consider these stocks formal picks, but rather 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 what some of their loyal CAPS followers say about them.

Tower of power
With an impressive free cash flow-to-sales margin of more than 40%, American Tower takes the honors as this week's most prolific cash king.

As one of the largest independent operators of communication sites in the world, American Tower has the mammoth scale (24,600 towers across the U.S., Mexico, and Brazil), exposure to the rapidly growing wireless market, and strong roster of clients -- including AT&T (NYSE:T), Sprint Nextel (NYSE:S), and Verizon -- to keep its cannons stuffed with cash.

Additionally, all seven Wall Street firms -- five of which are All-Stars --   whose calls we track on CAPS have an outperform rating on American Tower.

CAPS player fortunetella takes an industry-wide look:

Tower operators are fundamentally going to benefit from the minutes of use and subscriber growth forecasted in the near future. They have a very basic business model with recurring cash flows, annual rent escalators of 3-5% per lease, and very strong tenant lease renewal rates. ... High barriers to entry and low capex allow them to leverage effectively. Definitely a top pick.

Cephalon don
The next monarch on our list is Cephalon, a leading biopharmaceutical company focused on four areas: central nervous system disorders, pain, cancer, and addiction. For the past several years, Cephalon has used exceptional marketing prowess -- in developing drugs like Provigil (to treat sleepiness), Actiq (for pain), and Gabitril (seizure therapy) -- to generate healthy cash flows for its shareholders.

And, as my Foolish colleague Brian Lawler recently wrote, Cephalon's drop in share price (caused by a seemingly temporary surge in selling, general, and administrative expenses) might be providing Fools with a good buying opportunity. CAPS player NetscribeBiotech explains why:

... the future earnings of the company look bright with a good product portfolio which is both diversified and has a good mix of drugs being drafted to substitute existing products. The clinical pipeline also looks promising as two of its offerings -- Treanda and CEP-701 -- enter phase III trials this year, making Cephalon an interesting investment destination for investors.

Vault to the top
Our last free cash flow ruler this week is CommVault Systems, one of the few software companies focused exclusively on data management. Despite competing against the likes of IBM (NYSE:IBM) and Hewlett-Packard (NYSE:HPQ), CommVault has been able to grow its operating cash flow more than 200% over the last three years.

CommVault's single-platform solution -- in which data protection, replication, archive, and resource management modules work together under a single code -- is the competitive edge driving the cash flow for this king.

CAPS All-Star NetscribeSoftwre opens up the vault:

The storage management software market is expected to cross the $9 billion mark by 2009, from the 2004 levels of around $5.6 billion. ... considering the improved company guidance for 2007-08, its cost-competitive backup systems, and the attractive industry outlook, being a part of CommVault Systems might prove to be a good decision in the long run.

The Foolish bottom line
Free-cash flow-generating companies like American Tower, Cephalon, and CommVault Systems 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 to read how your fellow Fools feel about thousands of different stocks.

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. 

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is the strict set of rules that always rules Fools.