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 a stock such as Medis Technologies (NASDAQ:MDTL) -- which is a cash-burning company that CAPS generally dislikes -- these are businesses with free cash flow-to-sales margins above 15% (also known as the Cash King Margin) that our community is overwhelmingly bullish about.

So, sound the trumpets! Here's another trio of Cash Kings from CAPS:


Cash King Margin (ttm)

CAPS Bulls

CAPS Bears









Carpenter Technology (NYSE:CRS)




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

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

The potent potentate of payroll
With a whopping free cash flow-to-sales margin of more than 25%, Paychex takes the honors as this week's most prolific cash king. As the leader in payroll processing for small businesses, Paychex has a mammoth client base of more than 540,000 firms, high barriers to entry in the form of a huge infrastructure, and a relatively untapped market opportunity -- in business process outsourcing (BPO) -- to keep its canons stuffed with cash.  

In addition, my Foolish colleague Selena Maranjian -- better known as TMFSelena in Fooldom -- loves the capital-un-intensive nature of the Paychex kingdom:

"I love the business model here, which is relatively light. It handled outsourced work for many companies, processing paychecks and other things, and enjoying economies of scale. It started focusing on smaller firms, but is now aiming higher, and succeeding."

The khan of the quickies
Intuit is a free cash-flowing ruler that utilizes customer-driven innovation and a loyal customer base as the world's leading provider of accounting software. Intuit's extremely popular franchises -- Quickbooks, Quicken, and TurboTax -- have become such an easy-to-use standard for tax preparation and accounting tasks that it's difficult for customers (including yours Fooly) to use anything else.

Thanks to Intuit's more than 20 years of listening closely to end users, as well as exceptional branding efforts that have even bested powerhouse Microsoft (NASDAQ:MSFT), CAPS All-Star jtallenmd thinks the stock is definitely worth getting into ... it:

"Intuit is THE name in financial software. It has the top brand in personal finance (Quicken), the top brand in small business finance (Quickbooks) and the top brand in tax preparation (TurboTax). In addition, the number of financial institutions that work with Intuit software goes up every year."

The carpenter who became king
Our last free cash flow king this week is Carpenter Technology, a world leader of specialty metals. Carpenter gives a wide range of global firms -- such as General Electric (NYSE:GE), Texas Instruments (NYSE:TXN), and Westinghouse -- the ability to make products that require unique metallic properties (golf clubs, anti-theft devices, pumps, aircraft fasteners, etc.).   

Rising global demand for engineered products, high-performance alloys, and special-purpose metals has our CAPS community excited about Carpenter's prospects. For example, Phalo says this carpenter is about to nail a significant trend right on the head:

"This company (and others like it) are set to reap huge rewards from the increasing demand for specialty metals. One example of this increasing demand is the airline industry which is turning to lighter weight materials such as titanium in an effort to lower gross weight of aircraft and ultimately increase fuel economy."

The Foolish bottom line
Free cash flow-generating companies like Paychex, Intuit, and Carpenter Technology 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 week when I'll feature three more cash kings from CAPS. Until then, may your cash flow reign supreme.   

For more CAPS-style Foolishness:

Microsoft is a Motley Fool Inside Value pick, and Intuit is a former selection of that service. See which companies are currently making the cut, plus our archive of all past picks, with a free 30-day trial of the newsletter.

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.