The news couldn't have been better tailored to pair with my Foolish Forecast title if I had written it myself. Wednesday, before earnings came out at CarMax (NYSE:KMX), I argued that CarMax could really use a jump-start to revive its record of beating the best earnings estimates Wall Street could throw at it.

Yesterday, after it did just that, its shares, well, jumped. Up 10% for the day, in fact. What set the joint to jumping? You may be surprised at the answer: The auto retailer simply met its targets. Sales came in at $2.15 billion, as expected. Earnings, too, at $0.30 per share. Finally, CEO Tom Folliard reiterated guidance for this fiscal year: Same-store sales should grow 3% to 9%. Profits per share should come in at $1.03 to $1.14. Yesterday's big news, it seems, is that there was no news -- or at least, nothing bad.

So does the mere absence of bad news, and the meeting of expectations, justify a 10% jump in the stock's price (which is, by the way, continuing to climb today)? I'll leave answering that question to wiser heads than mine. Instead, today I want to focus on an interesting quirk of the company, which explains why, despite earning hefty profits under GAAP, it generates only meager free cash flow -- and why free cash flow may not be the best measure for evaluating this company.

Comparing fiscal Q1 2008 numbers to those from one year ago, CarMax grew net earnings 15% to $65.4 million. Meanwhile, its free cash flow came in at just $14.5 million in Q1. Why the difference? After generating massive operating cash flow -- $75.4 million in Q1, up 57% from last year -- CarMax is pouring these cash profits back into building its business at an accelerating rate. Compared with last year, the firm boosted capital spending more than 140% (building book value in the process).

In fact, the more I look at this company, the more I think it's a story akin to the one I outlined when recommending Wimm-Bill-Dann (NYSE:WBD) for the Fool's International Investing Report. (That stock has tripled in value since I recommended it in March of last year.) If you're jaded on the concept of P/E because you think "E" stands for "easy manipulability of earnings," but you're put off from investing in CarMax because its trailing free cash flow is negative, consider buying the company based on its growth in tangible book value -- the "bones" of the business. With tangible book value rising at the rate of 20.8% per year over the last five years, this company's bones are strong.

CarMax is an Inside Value pick. Spend 30 days with Philip Durell and his market-beating portfolio of some of the cheapest stocks on Wall Street -- it's free.

Fool contributor Rich Smith has no interest, short or long, in any company named above. The Fool has a disclosure policy.