3 More Kings of Cash

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 ingrained 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 General Motors (NYSE:GM) -- a cash-burning company that CAPS overwhelmingly dislikes -- these are businesses with free cash flow-to-sales margins of 15% and above (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:

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.

A Brazilian steel      
With an impressive free cash flow-to-sales margin of more than 35%, Companhia Siderurgica Nacional (CSN) takes the honors as this week's most prolific cash king.

As one of the largest steel producers in Brazil, CSN has the dominant market share (a 44% and 98% share in the galvanized steel and tin mill markets, respectively), vertically integrated low-cost production model, and exposure to rapidly developing markets to keep its coffers stuffed with cash.

Despite the stock's huge run-up of 80% over the last year, CSN still trades at a fairly reasonable forward P/E of 9.2 -- comparable to its biggest Brazilian counterpart, Gerdau (NYSE:GGB).

CAPS All-Star jangopanama gets to the point:

Well rounded product line, with steady demand and its own supply chain. Brazil is growing.

Printing money
The next monarch on our list is Hidden Gems Pay Dirt selection Cogent, one of the world's leading providers of fingerprint identification solutions. The stock is up 31% since the pick was made last February, thanks in large part to increased demand from law enforcement agencies such as the Royal Canadian Mounted Police and the Los Angeles Police Department.

For the past couple of years, Cogent has leveraged its highly regarded technology -- used for activities such as immigration enforcement, voter registry, and criminal investigations -- to generate healthy cash flows and returns on invested capital (ROIC).

CAPS All-Star TMFBreakerJava identifies the investment case:

This is the premier automated fingerprint identification company, which is an area that promises explosive growth as biometric technology is rolled out around the world. They have superior technology which promises increased accuracy in matching individual readings against the enormous databases of stored fingerprints in an acceptable period of time.

King of the forest
Our last free cash flow ruler this week is Aracruz Celulose, the world's leading producer of bleached pulp. Aracruz is yet another Brazilian-based behemoth, owning roughly 27% of the eucalyptus pulp market (used to manufacture writing, tissue, and other specialty papers).

Aracruz's natural advantages gained through the Brazilian climate (South American eucalyptus trees are among the fastest-growing in the world), as well as its integrated low-cost model, are what drive the cash for this king.

CAPS All-Star SeekBalance puts it on paper:

Ups and downs in the price per share should, to some extent, track ups and down[s] in the global economy. ARA is a good play to diversify a portfolio beyond U.S. companies. ARA offers relatively low downside risk, pays a decent dividend, and offers some clear room for growth.

The Foolish bottom line
Free cash flow-generating companies like CSN, Cogent, and Aracruz Celulose 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 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.