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 that metric to mask a company's true operations. Yet the 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 to potentially pay shareholders after investing in its business. 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 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-Yr CAGR, %

CAPS Rating    (5 Stars Max)

Praxair (NYSE:PX)



Stone Energy (NYSE:SGY)



Teva Pharmaceuticals (NASDAQ:TEVA)






Western Digital (NYSE:WDC)



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 companies cranking out piles of cash.

When even major oil companies such as Petrobras (NYSE:PBR) feel the pinch from oil's decline, you know that the smaller exploration and production firms (E&P) need this economy to turn around as much as anyone. Just the thought that things might be improving has pushed oil north of $60 a barrel again, which may signal better earnings for E&P's in the future. This past quarter, Stone Energy saw earnings run into negative territory, in part because it could only sell its oil at half of last year's price. Prices for its natural gas were down 19% on average.

CAPS member nottheSEC thinks that in a certain light, Stone Energy's quarter actually wasn't all that bad:

-Similar small cap oil stocks like this stock tanked when Oil plumeted they will rise when oil goes back up in the near term. In that group this is a top ten pick but not No.  1.

-resonable debt level, production up and decent quarter if you believe the one time charges are one time charges/. Im iffy

-Plus maybe a good sign about cash flow from their conference call (but who know with the double talk and I cannot stand the words :"derivative contracts") "Although $112.8 million in proceeds from unwinding hedging contracts was received as cash during the first quarter of 2009, the gain will be recognized for accounting purposes over the next three quarters which is the remaining life of the original derivative contracts."

The drive to succeed
An economic return to normalcy might just be in the works, if the predictions of stabilization in the personal computer market come true. Intel (NASDAQ:INTC) is at odds with market researchers at Gartner, who predict a 12% year-over-year decline in the PC market for 2009. In contrast, the chipmaker thinks things won't be nearly so bad.

That would be a welcome respite for hard-drive maker Western Digital. Even as its most recent quarterly profit dropped 82%, earnings and revenue beat in-house and Wall Street expectations alike. And Western Digital expects to post a profit again this year -- but only if conditions remain steady.

CAPS member Akiraiaia thinks one key factor will aid the company:

Need for storage increases. I've owned several [Western Digital] and Seagate / Maxtor drives. In the pas 24 months 4 Seagate drives died while I had no problem at all with [Western Digital]. They are the Mac under the [hard drive] producers.

The shares of the drive manufacturer have doubled off their November bottom, but they still have a trailing P/E of just 10.

Follow the money
Don't simply follow these stocks' trails of dollars -- 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 share your thoughts about these or any other stocks you think might keep on rolling in the dough.

Intel is a Motley Fool Inside Value pick. Petrobras is a Income Investor selection. The Fool owns shares of and options on Intel. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey 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.