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.

Mo' money
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 140,000 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)

RF Micro Devices (NASDAQ:RFMD)



Sohu.com (NASDAQ:SOHU)



Stryker (NYSE:SYK)



Teva Pharmaceutical (NASDAQ:TEVA)



Zimmer Holdings (NYSE:ZMH)



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 act like Scrooge McDuck and use this list as a jumping-off point to swim deeper into the piles of cash.

There's a wireless device in your future, and RF Micro Devices will likely be a part of it whether you realize it or not -- one of the company’s main products are the microchips that can be found in many cell phones. Although the recession continues to cause static with the company’s revenues, profitability is on the rise. As CAPS member sempire notes, RF Micro’s "components and knowledge will definitely make sure they are a key player" as mobile communication becomes even more central to our daily lives.

Yet as much as handset growth here will become integral as smartphones proliferate, China may ultimately be the key to meteoric growth.

According to the industry analysts at iSuppli, China's handset shipments totaled around 58 million units in the first quarter, up 9% from the fourth quarter of 2008, with expectations that the domestic handset market will grow to 239 million units for the full year, an 8% increase overall.

RF Micro's biggest customer for its wireless chips, Nokia (NYSE:NOK), is still far and away the industry's leading handset maker, but sales for its new N97 smartphone were underwhelming, particularly when contrasted with the new 3GS iPhone. However, Nokia's worldwide smartphone market share is a dominating 44%, and with smartphones accounting for nearly 8% of all handset sales in China, RF Micro's investments in the country should pay off.

Furthermore, RF Micro has been steadily diversifying its business, and after a costly restructuring begun last year, it is producing significant free cash flows. With sufficient capacity to meet demand, CAPS member j7777k sees RF Micro’s "Revenue, gross margins, and cash flow increasing."

The check is in the mail
Generic drug maker Teva Pharmaceutical might have seen net profits contract as its share count surged this quarter, but operating profits expanded to 24% on a 20% increase in revenues. Even so, its GAAP earnings of $0.83 a share beat analysts’ expectations by $0.03, and with health-care reform most likely on the horizon, CAPS member frtedcrilly says generic drugs are bound to be a key component of containing costs:

Keeping drugs costs down means encouraging generic usage, copaxone is a very useful MS treatment, and the company is ruthlessly efficient.

As powerful as generics growth might be, not everyone is so sure that Teva will benefit completely. angel696i notes that "Copaxone (for MS)…[is] expose[d] to generics competition.” Copaxone alone accounted for 20% of revenues in 2008.

Indeed, Mylan (NASDAQ:MYL) hopes to be  launching its generic version of Copaxone in the next two years, where it has exclusive rights for distribution in the U.S. and several international markets; moreover, Teva is already  fighting a generic version of Copaxone that Sandoz, a drug division of Novartis AG, wants approved.

Follow the money
What's your view? 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.

Sohu.com is a Motley Fool Rule Breakers recommendation. Novartis AG is a Global Gains pick. Nokia and Stryker are Motley Fool Inside Value selections. The Fool owns shares of Stryker. Try any of our Foolish newsletter services today, free for 30 days.

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.