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 it 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 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 pay 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-Yr CAGR, %

CAPS Rating
(5 stars max.)




Dynamic Materials (NASDAQ:BOOM)



Eli Lilly (NYSE:LLY)






Marvell Technology (NASDAQ:MRVL)



Source: Capital IQ, a division of Standard & Poor's; 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.

With a large and extensive pipeline of potential therapies for treating cancer, inflammation diseases, and more, Celgene has also seen its multiple myeloma treatment Revlimid continue to perform as well, increasing sales 72% to $343 million. CAPS member jerrygb777 not only likes the pipeline but thinks that Merck (NYSE:MRK) or some other pharmaceutical with a large bankroll might find the biotech an attractive takeover candidate. "Celgene is the leader in potential cancer drugs. ... With companines like [Pfizer] and [Merck] sitting on large piles of cash there is a takeover possibility but even without that this is a company with a huge future."

Note that while the company generated over $400 million in levered free cash flow over the last year, the large annual growth number above is because five years ago, it generated very little.

Ring the register
That seems similar to the background surrounding Eli Lilly's acquisition of ImClone Systems while awaiting word on passage of its own blood thinner treatment, prasugrel. The acquisition was seen as a risky gamble at the time, but now that the European Union has signed off on the treatment, it needs only FDA approval. Prasugrel will help it compete against Plavix, the blood thinner from Bristol-Myers Squibb (NYSE:BMY) and Sanofi-Aventis, which was a multi-billion dollar drug last year. Erbitux and ImClone's other five pipeline drugs will hopefully justify the $6.5 billion Lilly paid.

A good mix of drugs to treat aging baby boomers will allow Lilly to grow, according to CAPS member mfarland. "Baby boomers are getting older, and they are going to be needing an ever increasing amount of drugs to cure what ails them."

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.

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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.