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 prodigious generators of free cash flow (FCF) -- the amount of money a company has left over after reinvesting in its business that it could potentially pay to its investors. We'll find companies that have generated compounded FCF growth rates exceeding 25% annually over the past five years and then pair them with the opinions of the more than 130,000 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-Year CAGR, %

CAPS Rating (5 Max)

Abbott Laboratories (NYSE:ABT)






MGIC Investment (NYSE:MTG)



National Oilwell Varco (NYSE:NOV)



Quiksilver (NYSE:ZQK)



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.

With all of its segments exuding profits as efficiently as its stents do drugs, there's little wonder why Abbott Laboratories has been able to consistently generate high levels of free cash flow. The fourth quarter saw revenue in its pharmaceuticals segment improve almost 10% year over year, as sales of its anti-inflammatory drug Humira surged 42%. Sales in the vascular segment soared 59% on the strength of Abbott's relatively new Xience V stent. In fact, sales notched higher in each of Abbott's four major business segments in the latest quarter. A sales team that's been on fire has led to an equally impressive expansion in profit margins.

More recently came data that ought to help Xience steal market share from Boston Scientific: The Abbott stent maintained its consistent rate of major cardiovascular events (e.g., heart attacks), whereas its rival's Taxus device witnessed a significant increase. That ought to help spur further sales even if the field for stents is a crowded one.

Yet the pharmaceutical side of Abbott's business may be what caused speculation that it was the mysterious "Company X" making overtures toward pharma giant Wyeth (NYSE:WYE). In SEC filings, Wyeth said a mysterious suitor approached it in December, before its sale to Pfizer (NYSE:PFE), but it would not name the company. Abbott, for its part, would not comment on the speculation, but it did note that a large acquisition like this held little interest for it. That's led to further speculation from analysts that Abbott might have wanted just bits and pieces of Wyeth's business to bolt on to its own operations.

Investors are eyeing Abbott's valuation now and seeing opportunity. Some 94% of CAPS members rating Abbott find the chance of outperformance overwhelming. Some investors, such as PDiggity, believe it is being held back by fears over health-care reform, which is currently being pondered in Washington.

Undervalued relative to income and market position. Concern over [Obama']s health care reform plan. However, they have mostly products used during elective procedures, which Obama may have little effect on. Lots of growth potential, but some concern ... limited investment.

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. 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 roll in the dough.

Pfizer is a Motley Fool Inside Value recommendation. National Oilwell Varco is a Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

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