The saying goes "cash is king". However, it would probably be more accurate to say "cash flow is king". Cash flow may be the most reliable measure of what a company is earning. Cash flow is a measure that is not easily manipulated. Free cash flow (FCF) is defined as operating cash flow - capital expenditures. Companies that have high free cash flow levels are often financially healthy companies.
For this article, I have identified sixteen companies that are growing free cash flow at a five year compound annual growth rate (CAGR) of 50% or higher. In addition, I wanted to make sure that these companies were growing revenue as well. I narrowed the list to companies that are growing revenue at a CAGR of 25% or higher. Lastly, I have only included companies with a market cap of at least $3 billion.
Apple (AAPL)
| AAPL | |
| Market Cap | $314.6 B |
| 5Year CAGR FCF | 62% |
| 5Year CAGR Revenue | 36% |
| Forward P/E | 14.84 |
Alere Inc. (ALR)
| ALR | |
| Market Cap | $3.3 B |
| 5Year CAGR FCF | 95% |
| 5Year CAGR Revenue | 39% |
| Forward P/E | 14.51 |
Atheros Communications Inc. (ATHR)
| ATHR | |
| Market Cap | $3.3 B |
| 5Year CAGR FCF | 59% |
| 5Year CAGR Revenue | 38% |
| Forward P/E | 20.84 |
Bucyrus International Inc. (BUCY)
| BUCY | |
| Market Cap | $7.4 B |
| 5Year CAGR FCF | 75% |
| 5Year CAGR Revenue | 45% |
| Forward P/E | 16.53 |
Celgene Corp (CELG)
| CELG | |
| Market Cap | $26.5 B |
| 5Year CAGR FCF | 182% |
| 5Year CAGR Revenue | 47% |
| Forward P/E | 16.92 |
Hologic Inc (HOLX)
| HOLX | |
| Market Cap | $5.8 B |
| 5Year CAGR FCF | 66% |
| 5Year CAGR Revenue | 41% |
| Forward P/E | 18.07 |
Infosys Technologies Ltd. (INFY)
| INFY | |
| Market Cap | $41.9 B |
| 5Year CAGR FCF | 65% |
| 5Year CAGR Revenue | 56% |
| Forward P/E | 28.08 |
Intercontinental Exchange Inc. (ICE)
| ICE | |
| Market Cap | $8.8 B |
| 5Year CAGR FCF | 66% |
| 5Year CAGR Revenue | 49% |
| Forward P/E | 18.33 |
Intuitive Surgical Inc. (ISRG)
| ISRG | |
| Market Cap | $13.6 B |
| 5Year CAGR FCF | 61% |
| 5Year CAGR Revenue | 44% |
| Forward P/E | 31.53 |
LKQ Corp. (LKQX)
| LKQX | |
| Market Cap | $3.5 B |
| 5Year CAGR FCF | 54% |
| 5Year CAGR Revenue | 35% |
| Forward P/E | 17.69 |
Mercadolibre Inc. (MELI)
| MELI | |
| Market Cap | $3.8 B |
| 5Year CAGR FCF | 94% |
| 5Year CAGR Revenue | 50% |
| Forward P/E | 52.59 |
MetroPCS Communications Inc. (PCS)
| PCS | |
| Market Cap | $5.8 B |
| 5Year CAGR FCF | 111% |
| 5Year CAGR Revenue | 31% |
| Forward P/E | 16.37 |
Nuance Communications Inc. (NUAN)
| NUAN | |
| Market Cap | $5.9 B |
| 5Year CAGR FCF | 137% |
| 5Year CAGR Revenue | 36% |
| Forward P/E | 14.92 |
Priceline.com Inc. (PCLN)
| PCLN | |
| Market Cap | $25.4 B |
| 5Year CAGR FCF | 71% |
| 5Year CAGR Revenue | 26% |
| Forward P/E | 27.86 |
WebMD Health Corp (WBMD)
| WBMD | |
| Market Cap | $3.1 B |
| 5Year CAGR FCF | 54% |
| 5Year CAGR Revenue | 27% |
| Forward P/E | 42.72 |
Williams Partners L.P. (WPZ)
| WPZ | |
| Market Cap | $15.1 B |
| 5Year CAGR FCF | 50% |
| 5Year CAGR Revenue | 62% |
| Forward P/E | 15.77 |
This search for growing free cash flow and growing revenues yielded 16 names of mostly quality organizations. Although these are not recommendations, there are several names on the list I like. Apple is an obvious favorite for many. The company continues to produce high demand consumer electronics. I also like MetroPCS, as it may become a takeover candidate whether or not the AT&T (T) buyout of T-Mobile happens. I am also bullish on Williams Partners. The master limited partnerships pay excellent yields and hold tax advantages. Williams yields 5.42%.
Cash flow is an important metric for any stock evaluation. These companies represent an excellent starting point for further research.
Disclosure: I am long AAPL.
