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Because of the many accounting estimates used to calculate net income, one way to gauge its reliability is by comparing it to operating cash flow. Since cash flow is very hard to manipulate on the books, it is a good measuring stick for performance.

With that in mind, we screened for companies showing strong Free Operating Cash Flow. More specifically, we looked for companies that have seen free operating cash flow growth by more than 5% over the last 10 years (10-yr compund annual growth rate). Furthermore, we screened for companies with significant insider buying over the last 6 months (greater than 1%).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



The insiders seem to be enthusiastic about their employer's future earnings. Do you think they are on target? Use the data below to start your own analysis.

List sorted by percentage of insider buying.

1. Sterling Financial Corp. (STSA): Savings & Loans Industry. Market cap of $1.09B. Free Operating Cash Flow-10 Year CAGR at 15.11%. Net Insiders purchasing totaled 840,934 shares over the last 6 months, representing 5.91% of the company's 14.23M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.22). The stock has lost 77.08% over the last year.

2. Central Pacific Financial Corp. (CPF): Regional Banking Industry. Market cap of $555.50M. Free Operating Cash Flow-10 Year CAGR at 22.22% Net Insiders purchasing totaled 515,500 shares over the last 6 months, representing 3.56% of the company's 14.48M share float. The stock has lost 64.8% over the last year.

3. American International Group, Inc. (AIG): Property & Casualty Insurance Industry. Market cap of $53.30B. Free Operating Cash Flow-10 Year CAGR at 12.86%. Net Insiders purchasing totaled 6.98M shares over the last 6 months, representing 3.06% of the company's 228.47M share float. The stock has lost 5.% over the last year.

4. Webster Financial Corp. (WBS): Regional Banking Industry. Market cap of $1.73B. Free Operating Cash Flow-10 Year CAGR at 5.28%. Net Insiders purchasing totaled 2.05M shares over the last 6 months, representing 2.85% of the company's 72.12M share float. The stock is a short squeeze candidate, with a short float at 6.72% (equivalent to 11.37 days of average volume). The stock has gained 3.45% over the last year.

5. ITT Educational Services Inc. (ESI): Education & Training Services Industry. Market cap of $2.31B. Free Operating Cash Flow-10 Year CAGR at 34.43%. Net Insiders purchasing totaled 374,000 shares over the last 6 months, representing 1.68% of the company's 22.29M share float. The stock is a short squeeze candidate, with a short float at 26.72% (equivalent to 10.03 days of average volume). The stock has had a good month, gaining 13.38%.

*Data sourced from Screener.co, Reuters and Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Companies With Strong Cash Flow Growth and Insider Buying