3 More Kings of Cash

Welcome back to the world of the Cash Kings, where we highlight businesses that generate a healthy dose of free cash flow. Why is cash flow so important? Because it gives management the opportunity to boost shareholder value through actions like:

1. Paying dynasty-building dividends.  

2. Buying back shares at attractive prices.

3. Growing the business organically, without having to borrow money or sell shares. 

A Fool's guide to free cash
Investing, after all, is about putting money up front today in order to get more of it in return tomorrow. Here at the Fool, we're firm believers that free cash flow, as opposed to traditional accounting earnings, is the best gauge of a firm's health and profitability (or lack thereof).

So, with these cash flow lessons deeply ingrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three more cash-flow rulers of our Motley Fool CAPS kingdom.

Unlike Plug Power (NASDAQ:PLUG) -- a cash-burning company that CAPS overwhelmingly dislikes -- these are businesses with free cash flow-to-sales margins above 15% (also known as the Cash King Margin) that our community is pretty bullish about.

Sound the trumpets! Here's another trio of Cash Kings from CAPS:

As always, don't consider these stocks formal picks, but rather suggestions worth further investigation. After all, due diligence is the Fool's way to riches.

Just for starters, here's a quick summary of these cash-throwing kings, and what some of their loyal CAPS followers feel about them.

GI Joe           
With an impressive free cash flow-to-sales margin of over 25%, Axcan Pharma takes the honors as this week's most prolific cash king.

As one of the leading pharmaceutical companies focused solely on gastrointestinal disorders, Axcan has the specialized expertise, strategic in-licensing business model (in which it acquires drugs in late-stage trials versus spending too heavily on R&D), and well-entrenched salesforce to keep its fortress flush with cash. In addition, Foolish pharma expert Brian Lawler likes Axcan's small-cap size, which gives it plenty of room to grow.

Meanwhile, CAPS All-Star darkflame has good things to say about management pay:

A look at the management compensation put a smile on my face -- these guys are actually being underpaid. But it's fine, that just means that their true compensation comes from the valuation of the stock and that their interests are aligned with the shareholders.

Thirst for BLUD
The next monarch on our list is Immucor, the United States' leading provider of blood testing products. For the past couple of years, Immucor has leveraged the success of its revolutionary Galileo instrument -- which can automate all of the tests necessary before a blood transfusion -- to generate healthy cash flows for its shareholders.

Despite a seemingly steep valuation, CAPS player timlewisatlanta1 thinks the stock should keep pumping:

This is a growth stock with plenty of growth left in it. Leads its market. Has revenue built into contracts. Owns patents. Is expanding internationally. P/E may be high, but you have to pay a premium for top stocks. As with any growth stock, keep an eye on earnings, as eventually growth will level out and the multiple may contract a little.

Learn from Apollo
Our last free cash flow ruler this week is Apollo Group, the leading provider of higher education programs for working adults. Fueled by explosive enrollment growth at its University of Phoenix and Western International University subsidiaries, Apollo has become one of the awesome stories over the past decade.

Apollo's well-respected brands, accredited programs, and favorable demographic trends (a growing number of students older than 24), are what drive the cash flow for this king.

Back in January, CAPS player ISPYVALUE spotted value in Apollo's shares. The stock is up roughly 50% since this sweet call was made:

This is a company that generates high free cash flow and has solid growth. ... Some recent compliance struggles have hindered the stock but this will not affect its long term prospects. The company has been taking advantage of its own undervalued price by aggressively buying back shares. Over the long run, cash is king!

The Foolish bottom line
Free cash flow-generating companies like Axcan Pharma, Immucor, and Apollo Group are always among my top candidates to research further. Our Motley Fool CAPS intelligence database is a great place to look for your own Cash Kings or read how your fellow Fools feel about thousands of different stocks.

Click here to join the forward-thinking CAPS community free of charge.

Be sure to join us next time when I'll feature three more Cash Kings from CAPS. Until then, may your cash flow reign supreme.   

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is the strict set of rules that always rules Fools.