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 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 135,000 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)

Broadcom (NASDAQ:BRCM)









Ingersoll-Rand (NYSE:IR)



Joy Global (NASDAQ:JOYG)



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.

There seems little doubt that light-emitting diodes (LEDs), will be the next step in high-efficiency lighting. As incandescent bulbs are forced out of existence, compact fluorescents have become the next step in cutting down on the energy wasted by lightbulbs. But they are likely just a way station on the way to the ubiquity of LEDs, which until now have been hampered by their higher cost.

Several new Department of Energy programs under President Obama's stimulus program are targeting $50 million to spur further research, development, and marketing of solid-state lighting by lowering their cost and increasing their efficiency. Expect to see lighting giants like General Electric (NYSE:GE) and Siemens (NYSE:SI) in the forefront here.

Until the replacement bulb market for residential uses catches on, commercial applications will continue to be the leader with these products. In the near term, though, it actually may be the computer market where the largest growth occurs. And for that, Cree ought to benefit from rising demand.

According to the market researchers at DisplaySearch, 10.6 million LED-backlit LCD panels larger than 10-inch diagonal were shipped in the first quarter of 2009, with as many as 104.5 million units expected to be shipped for the full year. And iSuppli predicts that TVs using LED backlights will capture 39% of the market by 2013, up from today's 3% share.

It was a projected increase in bookings for notebook backlighting that allowed Cree to boost revenue and earnings projections for the quarter that just ended, although ramping up production to meet rising demand may pose some challenges.

As LEDs proliferate -- whether in residential construction, municipal lighting systems, parking lots and tunnels, or office and commercial applications -- Cree, as a pure play in the field, should be a standout. At nearly 100 times earnings, though, it is not cheap and needs to execute perfectly. Bear in mind the production ramp risks when investing here.

Top-rated CAPS All-Star PhillyDan thinks Cree's opportunities (and earnings) will continue to expand:

As LED lighting applications continue to grow, CREE which is a leader in LED components will show continued growth in EPS over the next few years.

Yet CAPS All-Star noescaper sees the risks inherent in an investment: "It's recent breakout is running out of steam...How high can it goes still - $35 is an obvious mid-long term resistance? The downside potential is huge."

The CAPS Semiconductors & Semiconductor Equipment sector has risen 4% over the past month compared to a generally flat performance by the S&P 500. Cree, however, has fallen nearly 7% over the same time frame.

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 on 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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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.