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 the 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 125,000 members of the Motley Fool CAPS investor intelligence community to see which ones might have the best chance of outperforming the market.


Levered FCF 5-Yr. CAGR, %

CAPS Rating (out of 5)

Nasdaq OMX Group (NASDAQ:NDAQ)






Nucor (NYSE:NUE)






Precision Castparts (NYSE:PCP)



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 looking 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 steel prices having fallen by more than half since their July highs, and U.S. mills cutting their capacity by half as well, the potential for a rebound in the industry seems to be a ways off yet. ArcelorMittal (NYSE:MT), for example, forecasts a further 10% drop in demand for steel and is planning additional production cuts.

Nucor has proven itself to be a scrappy player in these times, despite a 71% drop in profits last quarter. While many believe that the stimulus package signed yesterday may help steel makers like Nucor and US Steel (NYSE:X) because of its focus on infrastructure, there are other concerns that could still cause a setback. Nucor, for example, is mulling whether to open a pig iron plant in Louisiana or Brazil, and it may be leaning toward the latter because of overly stringent environmental compliance concerns that make the former not as attractive. It also doesn't think the stimulus plan is big enough to have much of a lasting impact.

Nucor, though, is better positioned than most steel producers to ride out this downturn. It's avoided the mass layoffs that have stricken some of the larger companies and will actually be issuing bonuses to employees because of the record earnings it enjoyed last year. With more than $2.3 billion in cash, its war chest could assist Nucor in picking off downtrodden rivals at distressed prices if the recession persists.

The prospects for recovery and Nucor's dominant position at this point are leading some investors to conclude that the steel producer is poised to be a big winner. Top-rated CAPS All-Star member MattH42004, who ranks higher than 99% than all of the members of the investor-intelligence community, suggests that Nucor will be able to finance its own growth from within:

When the economic recovery comes Nucor should come out a big winner. First, the company has a tremendous balance sheet. ... Nucor also has by far the best management in the steel industry. ... They manage to keep costs down by using scrap metal, relying on more efficient mini-mills, and avoiding any union labor by using generous profit sharing, performance based pay, and avoiding the ... executive perks that ruin the culture of so many other companies. The current 3% yield is also nice and appears well covered.

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. Head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks you think will continue rolling in the dough.

Nasdaq OMX Group is a Motley Fool Inside Value pick. Precision Castparts and Paccar are Motley Fool Stock Advisor selections. The Fool owns shares of Nasdaq OMX Group. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey also owns options on Nasdaq OMX Group but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.