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 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 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-Year CAGR, %

CAPS Rating (out of 5)

Ashland (NYSE:ASH)



Chart Industries (NASDAQ:GTLS)



Kroger (NYSE:KR)



Lennar (NYSE:LEN)



Martha Stewart Living Omnimedia (NYSE:MSO)



Sources: 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.

It didn't take Rick Santelli's "rant heard 'round the world" to tell people the homeowner bailout was bad news. Instead, it provided a rallying point for opposition, and offered an outlet for the outrage over all the bailouts that have been initiated.

Some investors, however, might be thinking that the money flowing into the housing sector -- in the form of lower interest rates for home mortgages; greater access to financing through the FHA, Fannie Mae, and Freddie Mac; and foreclosure relief -- could be a catalyst to reverse the malaise afflicting homebuilders like Lennar, Toll Brothers (NYSE:TOL), and Hovnanian (NYSE:HOV).

While that's possible, investors would still be wise to use caution before jumping in. For example, I've pegged Hovnanian as one of the worst stocks for the coming year because it harbors a poor debt-to-equity profile. However, Lennar has issues all its own, unrelated even to the freefall of housing prices. Even as the S&P/Case-Shiller home price index saw prices fall 18.2% in the fourth quarter -- the largest drop ever in the 21-year history of tracking them -- Lennar has drawn the attention of the Fraud Discovery Institute, a forensic accounting site run by former stock felon Barry Minkow.

FDI casts a critical eye on the transparency (or lack thereof) at Lennar's many joint ventures, claiming that the homebuilder is engaging in activities reminiscent of a Ponzi scheme. Strong words, to be sure, but Lennar CEO Stuart Miller said in a CNBC interview that at one time, Lennar had more than 300 joint ventures. FDI argues they were used to keep investors in the dark about a trail of related-party transactions. Of course, Lennar denies any such activity took place. While Miller said in that interview that they've reduced their number of joint ventures by 60%, analysts have long been skeptical of the homebuilder's off-balance-sheet arrangements.

Many CAPS members took note of FDI's attack on Lennar in rating the company to underperform the market, but top-rated CAPS member icanpickm suggests a more practical reason to avoid the stock. With high levels of debt and few ways to pay it off until the economy rebounds -- something that even Ben Bernanke suggests won't happen until next year -- this stock has a greater chance of becoming a penny stock than bounding higher. icanpickm writes:

Mountains of debt and no way to pay it off until land appreciates. That could be a decade. Too many limited partnerships that are doing just as bad as the industry. I think it is going below one dollar.

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?

Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey owns shares of Kroger 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.