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.

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 125,000 members of the Motley Fool CAPS investor-intelligence community, to see which ones might have the best chance of outperforming the market.

Over the first 20 months that CAPS tracked data, four-star stocks outperformed the market by more than seven percentage points, while five-star stocks did even better. Keeping an eye on these top stocks might signal your best opportunity to capture those gains.


Levered FCF 5-Yr. CAGR

CAPS Rating    (5 max)




Chicago Bridge & Iron (NYSE:CBI)



Coach (NYSE:COH)



Ryland (NYSE:RYL)



Sohu.com (NASDAQ:SOHU)



Source: 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 use this list as a jumping-off point to dig deeper into the piles of cash.

Particularly during an economic downturn, generic-drug makers like Teva Pharmaceutical (NASDAQ:TEVA) should continue to prosper, as both consumers and insurers look to save money on the cost of prescription drugs. That might typically trouble a drugmaker like Amgen, which is potentially facing a number of threats to its therapies from biosimilar drugs. Yet management is putting up a brave front as it says the biosimilars for its blood thinner Neupogen do not pose the same threat that generic pills do. 

Biosimilar drugs are generic versions of therapeutic drugs derived from biological sources, and while they're available in Europe they haven't yet found an approval mechanism here in the U.S. If they eventually do come to these shores, the primary biologics may enjoy some extra protections unavailable to traditional brand-name drugs that go off patent.

Top-rated CAPS All-Star member SwordAgain sees Amgen as a secure biotech with a strong pipeline. This investor thinks it may even be attractive to a bigger pharmaceutical looking to shore up its own depleted pipeline:

1/15/09 Pitch: Upthumb. Earnings 1/26/09, 5:00 PM. Low risk outperforming drug company with good pipeline, no expiration issues and is a possible buyout candidate.

Ring the register
Up until last year, the Chinese stock market had been growing by leaps and bounds. Now investors look on it as anathema, thinking that shrinking earnings will hold it back from further advances. Two big names in the country, Aluminum Corp. of China (NYSE:ACH) and CNOOC, fell 18% and 11%, respectively, last week as fears of a widening global recession continued. Yet some smart Fools think China remains the global economic story for the next few decades, and the depressed values it represents today are an inflection point for that future growth.

CAPS member ypcheng believes the huge economic stimulus package the Chinese government recently unveiled will boost shares of stocks like Sohu.com:

Chinese stocks took a terrible beating today. I happen to believe that Chinese market will be the first to recover because its economic stimulus package as well as growing internal consumption. Comparing to our negative GDP now, theirs is still in the high-end single digit. This stock is the leading Internet player which should lead the recovery.

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. 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.

Chicago Bridge & Iron and CNOOC are Motley Fool Global Gains selections. Sohu.com is a Rule Breakers pick. Coach is a Stock Advisor recommendation. Try any of these newsletters, free for 30 days, and you can review all our current recommendations for where to put your money as well as our past picks. Judge for yourself how well the Fool has done.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.