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 it 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.


Levered FCF
5-Yr CAGR, %

CAPS Rating (5 stars max.)

MasterCard (NYSE:MA)



WellPoint (NYSE:WLP)



Seagate Technology (NYSE:STX)



Strayer Education (NASDAQ:STRA)



Reynolds American (NYSE:RAI)



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.

When you just process transactions without taking on the risk of extending credit to consumers as Mastercard and Visa (NYSE:V) do you've effectively limited your own risk profile associated with the current credit crisis. Yet limiting risk is not the same as having no risk. As the recession deepens consumers are cutting back on their purchases which means they'll be making fewer transactions. MasterCard reported that gross dollar volumes in the U.S. fell 5.2% while purchase transactions were down 4.6% last quarter. At 13 times 2010's estimated earnings MasterCard is not particularly expensive, but a patient investor may yet find a better opportunity to credit the stock to his portfolio.

However, top-rated CAPS All-Star member JoeAgresti thinks the high short interest the stock has drawn is indicative of investors who've misread how good MasterCard is as a long-term play.

For all those who got short-almost 11% of the shares outstanding I know that was you on that magical 20pt day yesterday. This is just a pullback and [Mastercard] will resume course back above 40BIL market cap where it belongs. [Mastercard] and [Visa] are stocks for now and stocks for the future, dont short again.

Ring the register
Solid-state drives are seen as an eventual replacement for hard-disk drives, such as those made by Seagate Technology, but their higher cost doesn't make them a one-for-one substitute, even if they offer arguably better performance. Even with Intel (NASDAQ:INTC) cutting the costs of its SSDs, it's possible to get nearly three times the storage with an HDD for the same cost.

CAPS member Corineus also isn't convinced that SSDs provide such better performance either. They offer limited write cycles as well as slower read/write speeds, not to mention the higher cost and the smaller capacity. This member thinks that until SSDs advance further, Seagate will maintain its leadership position.

[Seagate Technology] is the leader in hard drive technology, with the change in leadership and an emphasis on innovation it will continue its dominance for the foreseeable future. The concern about being behind the curve because the company has not invested in solid state data storage is misguided: until thin film CuOxide incorporating a pure copper interphase is commericially available, solid state storage will never have the reliability and storage density as hard drives.

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.

WellPoint and Intel are Motley Fool Inside Value recommendations. Strayer Education is a former Stock Advisor selection. The Fool owns shares of and sold covered call options on Intel. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey also owns shares of and options on Intel but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.