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 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 145,000 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)

Deckers Outdoor (NASDAQ:DECK)



Flextronics (NASDAQ:FLEX)



Tessera Technologies (NASDAQ:TSRA)



Teva Pharmaceutical (NASDAQ:TEVA)



Thoratec (NASDAQ:THOR)



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 follow his lead and use this list as a jumping-off point to dig deeper into the piles of cash.

It's been a rough month for chipmaker Tessera Technologies. The International Trade Commission issued a Solomon-like ruling saying that although Tessera's patents were valid, a bevy of chipmakers it was suing, from Acer to Elpida, did not infringe on them. Tessera was then forced to admit that fourth-quarter revenues wouldn't be as large as previously forecast because royalties from key customers were lower than expected. The first quarter wasn't shaping up to be too hot, either, coming in much leaner than analysts had expected. Shares are off 40% from their October highs as a result.

Yet the stock trades at just 13 times earnings and seems cheap when viewed against even revised analyst projections for growth. It looks like another case of the market being shortsighted.

Tessera holds a portfolio of valuable patents for which it receives royalty payments from industry heavyweights like Intel (NASDAQ:INTC), Texas Instruments (NYSE:TXN), and Samsung. It's noteworthy that Intel reported a better-than-expected fourth quarter of its own, while predicting 2010 would also be an exceptional year. That's important for investors to remember because Tessera recognizes revenues one quarter in arrears, meaning any business it's getting now won’t show up until later on.

Analysts may have struck a sour note for the current year, but highly rated CAPS All-Star member forexnutca sees the growth of smartphones as a key to Tessera's success:

Royalties, over 1700 patents, cash, no debt, and value!?......value? Yes, that's right, a tech stock with growth and value at today's price. Nice play on the upcoming smart phone boom. They've been around for a while, and provide R&D, and chip miniaturization technology. Could be a take over target, or a Qualcomm in the making. Nokia's already signed on.

Some 91% of the CAPS members rating Tessera believe it will outperform the market. You can chip in with other investors on the Tessera Technologies CAPS page to lay out your case for its ability to generate even greater gobs of cash.

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 that you think will continue 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. Intel is an Inside Value selection, and Motley Fool Options has recommended buying calls on it. You can see Rich's holdings here. The Motley Fool has a disclosure policy.