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 distribute 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 more than 120,000 members of the Motley Fool CAPS investor intelligence community, to see which ones might have the best chance of outperforming the market.

Over the first 20 months since CAPS began tracking the data, four-star stocks have outperformed the market by more than seven percentage points, while five-star stocks did even better. Keeping an eye on these top stocks might signal your best opportunity to capture those gains.


Levered FCF
5-Year CAGR %

CAPS Rating
(5 stars max)

Allied Capital (NYSE:ALD)



Norfolk Southern (NYSE:NSC)



ProLogis (NYSE:PLD)



Take-Two Interactive (NASDAQ:TTWO)






Source: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.
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.

It's possible that the non-merger between Take-Two Interactive and Electronic Arts (NASDAQ:ERTS) is one EA will live to regret. Take-Two is looking toward the future on its own. While its contract with Grand Theft Auto maker Rockstar Games expires in February -- and there are a few rivals, like Activision Blizzard (NASDAQ:ATVI), that could make a move to sign up Rockstar -- the game maker hopes the two will have a long-lasting relationship.

It's not a recession-proof industry, but having proven itself more resistant, CAPS member whimvestor thinks Take-Two will benefit from gamers seeking to get the greatest value from their systems instead of going off on other costly pursuits:

Despite the economic meltdown, I expect GTA franchise to do well this holiday season. People will be looking to get more "value" from their investment in consoles by buying more titles. This will be in lieu of more expensive purchases like consumer electronics, vacations, etc.

Ring the register
While some investors feel that real estate investment trust ProLogis is ready to roar, there is lingering concern about its nagging debt that comes due next year. However CAPS member mpgary believes the new management team is working diligently to reduce the debt load and makes the case that the REIT may be undervalued:

[ProLogis] is undervalued. It is the largest industrial REIT in the world and just managed two financings on favorable terms. It has reduced its dividend and its new CEO is initiating a new strategy to reduce debt.

Change agent
It's been its pricing power even in the face of a recession that has allowed Norfolk Southern to turn in strong financial results and generate significant free cash flow. CAPS member knuemac finds the potential for higher fuel prices yet another engine driving this train forward:

Most efficient operator in the field, solid growth, built in market, already spent money on its infrastructure. Fuel prices will have a positive effect and are sure to return to higher levels soon.

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. Why not 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?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.