The smartphone boom continues, but Qualcomm (NASDAQ:QCOM) shareholders might feel like they're missing out on the party. The company's stock price is down about  5% this year, badly underperforming the overall market's double-digit gains. The negative sentiment surrounding Qualcomm got even worse when it released fourth-quarter and fiscal 2014 earnings that failed to meet analyst projections last week.

Nonetheless, it's worth noting that Qualcomm is growing like a weed. Though its results missed estimates, that has much more to do with analyst forecasts that were far too ambitious than with a lack of growth potential. Qualcomm is taking advantage of the exploding growth in smartphone usage, particularly in the emerging markets, where demand for its chipsets remains robust.

Things are cloudy right now because of a concerning situation unfolding in China, but once the fog clears, what remains will be a highly profitable company that generates tons of cash and sports a cheap stock.

Qualcomm's growth remains on track
Qualcomm plays a major role in connectivity and wireless data. Shipments of its 3G and multimode 3G/4G chipsets are soaring. This is particularly true in China, where the 4G rollout is still in the early stages. In fiscal 2014, Qualcomm set company records for revenue, adjusted earnings per share, device sales, and MSM shipments. That's because Qualcomm has a leadership position in several product categories. For example, the Snapdragon 805 is the first processor with ultra HD support. And its fourth-generation Gobi 9x35 processor is now shipping.

Unfortunately, Qualcomm is facing a very challenging environment in China. Qualcomm management believes that certain licensees in China are underreporting sales of licensed 3G and 4G devices. In addition, Qualcomm revealed that it's under investigation by the China National Development and Reform Commission. As if that weren't hard enough, regulatory issues are spreading beyond just China. Qualcomm also said it's become the subject of an investigation by the Federal Trade Commission in the United States for practices pertaining to its patent licensing business.

The financial repercussions that will arise from these situations, if any, are difficult to estimate. Qualcomm does leave open the possibility for stiff fines and other financial penalties. However, after losing roughly $13 billion in market value since releasing earnings, it's reasonable to believe the financial damage from these investigations is priced in. It's worth remembering that the underlying business continues to perform well.

Qualcomm still expects as much as 8% revenue growth and 12% operating income growth next year. Those targets will be fueled by increasing device sales and higher average selling prices per device.

Underappreciated for its cash generation
While Qualcomm's headline growth may have been lighter than expected, investors are underappreciating the company's huge cash flow generation. Qualcomm increased its dividend for the 12th consecutive year in fiscal 2014. Qualcomm currently pays an annual dividend of $1.68 pe share, yielding 2.4% at Friday's closing share price. And the company buys back boatloads of its stock. In all, it returned $7.1 billion to investors last year through share buybacks and dividends.

Plus, Qualcomm produced $7.7 billion of free cash flow in fiscal 2014. With virtually no debt on the balance sheet to worry about, Qualcomm's cash is piling up. The company now has $32 billion in cash and investments on the balance sheet.

The situation in China is difficult and will take some time to resolve, but the bottom line is that Qualcomm's chipsets are seeing huge demand and will continue to for the foreseeable future. Technology research firm Gartner calculates that more than 8 billion smartphones will be sold across the world over the next five years. That forecast is reflected in Qualcomm's outlook for fiscal 2015, which calls for continued growth. Qualcomm expects to ship a total of 1.5 billion devices next year, which would represent 15% growth year over year.

The current headwinds facing Qualcomm are significant but should ease with time. In the meantime, investors can take advantage of a deeply discounted stock that looks very cheap given its fantastic growth prospects.