Back in April, I pointed out an unattractive aspect of for-profit educator DeVry's (NYSE:DV) revenue growth. While the company had bumped its revenues up 16% year-on-year, its earnings had increased by only half that. Well, in its fourth-quarter and year-end earnings release yesterday, DeVry answered my criticism in spades, reversing the previous quarter's statistics by posting revenue growth of 14.7% over Q4 2003 but profit growth of nearly twice that: 29.2%.

Touche, DeVry? I'm afraid not. For over a longer-term perspective -- and we are all about the long term here at the Fool -- DeVry's annual results more resembled last quarter's than this one's. Year-on-year, DeVry's fiscal 2004 revenues grew 15.5%, but its profits declined by 5%. Granted, if you back out a tax benefit of $0.12 that the company received in fiscal 2003, DeVry's profits would have increased from $0.75 to $0.82. Still, a 9.3% increase in profits on the back of a 15.5% increase in revenues is nothing to brag about.

That's the bad news. But let's take a look at another aspect of the company, one I especially like to check on when reviewing a small cap such as DeVry. Because every small cap is a potential Hidden Gem, and the uglier the surface numbers, the greater the likelihood that Wall Street will pass over DeVry and focus on the more attractive numbers being posted by its competitors: Career Education (NASDAQ:CECO), Corinthian Colleges (NASDAQ:COCO), Apollo Group (NASDAQ:APOL), Strayer (NASDAQ:STRA), University of Phoenix Online (NASDAQ:UOPX), or ITT (NYSE:ESI).

For instance, let's take a look at DeVry's free cash flow situation. Over the past three years, it has consistently increased its free cash flow: from $27.6 million in 2002 to $56.4 million in 2003 to $91.6 million in 2004. That's an average of 80% FCF growth per annum, which stands in marked contrast to its GAAP earnings decline of 9.4% per annum over the same period.

What does that mean? Well, for one thing, it means that noncash entries on the company's cash flow statement, such as depreciation and amortization, are depressing DeVry's reported earnings. But more importantly, it means that the company is generating impressive amounts of cold, hard cash -- cash it is using now to pay down debt, cash that in the future will either pile up on its balance sheet or be used to grow its business, initiate a dividend, or buy back shares -- all of which promise to reward shareholders in future years.

To educate yourself:

Fool contributor Rich Smith owns no beneficial interest in any companies mentioned in this article.