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 a company's 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 proved themselves to be 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, and then pair them with the opinions of the 125,000-plus 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-Year CAGR, %

CAPS Rating        (5 Max)

Chesapeake Energy (NYSE:CHK)



Dow Chemical (NYSE:DOW)



Sun Microsystems (NASDAQ:JAVA)



Transocean (NYSE:RIG)



Vornado Realty Trust (NYSE:VNO)



Sources: 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.

Even as some cavalry units mount the hilltop to help Dow Chemical circle the wagons with its Rohm and Haas (NYSE:ROH) acquisition, I believe the chemical company is outmanned and outgunned.

The two companies head to court next week to resolve their merger. Dow wants a delay, even though it maintains that it wants to complete the deal, even at the original terms. Rohm and Haas, on the other hand, insists that Dow has the resources to consummate the deal now and should proceed as planned.

If the recent court adventures of Huntsman (NYSE:HUN) and Hexion are any indication, Dow's scalp might not be anchored to its head much longer. Hexion's private-equity owners had tried to argue that the company would be bankrupt if the merger went through, yet the courts held Hexion to the terms of the agreement. It was only Huntsman's beneficence in accepting a $1 billion payment that allowed Hexion to back out. In Dow's case, meanwhile, there's no talk of bankruptcy. Dow is just claiming that it might have to make some cuts.

Worse for shareholders is that Dow might need to sell off its agricultural-sciences division to pay for the deal. Even though that's Dow's smallest segment, at just 8% of revenues in 2008, it accounted for a whopping 40% of the chemical company's operating profits in the same period. Even if Dow gets a decent price for the unit, that's going to be a hard chunk of change to recover. Dow AgriSciences is the sixth-largest player in the $48 billion agricultural chemicals industry.

There are a number of reasons Dow's stock has been beaten down outside of the merger bungles, such as high energy costs and the recession. They've even taken a toll on the stocks of Huntsman and Rohm and Haas. But many investors single out Dow CEO Andrew Liveris as the primary reason they're going on the warpath. CAPS member Scorpioray believes that the CEO has lost credibility with the investing community.

This company is being driven into the ground by its leadership. They have presided over a market capitalization drop of over $30 billion. They have exposed the company and its shareholders to an $18 billion [acquisition] with uncommitted and unaffordable financing. The rating agencies have lowered the company's debt rating to effectively junk. This company's leadership has presided over a cut in the quarterly dividend ... the first time such an abomination has EVER [occurred]. And within the next month they'll waltz into Delaware's Chancery Court and try to convince a judge that they don't need to honor an air-tight agreement to acquire Rohm & Haas for $ 78 per share ... just because bad things happened that they didn't foresee. And while they're waiting for the court date to come around, they're running up a bill of about $3 million per day to Rohm & Haas shareholders for not having consummated the acquisition when previously agreed.

Follow the money
These stocks have left a trail of dollars, but it still 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 have to say about these or any other stocks that you think will continue to be rolling in the dough?

Chesapeake Energy is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of Huntsman but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.