At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
China Security and Surveillance (NYSE: CSR). If you had to pick just one Chinese stock that would do better than any other, going by name alone, and knowing nothing in particular about the companys' business models, their financial performance, or competitive environment, this would have to be it. Fortunately for investors, there's no need to buy this stock on its name alone. Oppenheimer has taken a close look at China Security and Surveillance, crunched the numbers, and come away impressed. So impressed, in fact, that it recommended buying the shares this morning.

Why? Well, so far the mainstream media is playing mum on the exact reasons for Oppenheimer's optimism -- but I think we can guess. On Wednesday, the company released updated guidance for this year's likely performance, raising its revenue range to $830 million to $850 million (versus consensus expectations of $795 million) and confirming that it could hit analysts' targeted earnings of $1.16 per share this year. When you consider that said shares are priced at less than $5 apiece now, the resulting current-year P/E ratio of 4.3 makes it pretty clear why Oppenheimer probably likes the stock.

I only wish I could agree. I only wish it were as simple as Oppenheimer's clear-cut buy rating, sans context, makes it sound. But it isn't.

Simple is as simple does
This isn't a simple case of 4 P/E plus 22% forward growth rate = Buy this stock hand over fist. Fact is, there's a significant gap in China Security & Surveillance. Specifically, a gap between GAAP-reported "net income" and the free cash flow the company actually produces.

Over the past 12 months, this company has done a fine job of reporting "profits" from its business: $57.8 million in total and growing by leaps and bounds. However, free cash flow for the same period came in at negative $34 million.

China Security & Surveillance has done a great job of selling stuff in recent years, no doubt. Over the past five years, the company's sales have rocketed 18-fold, hitting $605 million for the past 12-month period. Problem is, the only thing China Security & Surveillance is better at than growing sales is growing its pile of uncollected bills on those supposed sales. Accounts receivable are up 25 times in value over the same period. And maybe I'm just being paranoid here, but I have a sneaking suspicion that the company's failure to get customers to pay for the stuff they are "buying" may have something to do with the fact that the company just had to dilute its shareholders with a follow-on offering that expanded its share count by 24%.

Foolish takeaway
This, Fools, is no way to run a business. At least, not a sustainable business, or one worthy of your investing dollars.

My advice: Rather than invest in China Security & Surveillance, why not stick closer to home? U.S. companies like General Electric (NYSE: GE) and Honeywell (NYSE: HON) manufacture similar product lines, and as multinational companies, each can be expected to grab at least a piece of the Chinese pie.

Granted, they may sell for higher P/E multiples than China Security & Surveillance, and they might not be growing their sales as fast as it is -- but at least their profits have free cash flow to back them up. And I'll take real profits over paper profits any day of the week.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he was recently ranked No. 449 out of more than 165,000 members. The Motley Fool has a disclosure policy.