The ranking measure is free cash flow minus stock-based compensation, divided by net income, all over the trailing twelve months and taken from each company's SEC filings. Free cash flow is operating cash flow minus capital expenditure.

Why subtract stock pay? Paying staff in shares is a real cost to shareholders, but it never uses cash, so it lowers net income without lowering free cash flow. On the raw measure, companies that pay heavily in stock and barely break even look like exceptional cash generators. The gap between the two columns shows how much each company's cash depends on paying in shares.

An accounting adjustment, not a forecast. Deducting stock pay corrects free cash flow for a cost it leaves out; it says nothing about future share prices.

Why this measure. Accounting researchers have long studied how much of a company's reported profit arrives as cash. Work going back to Sloan (1996, The Accounting Review) and, more recently, Ball, Gerakos, Linnainmaa and Nikolaev (2016, Journal of Financial Economics) treats cash-backed profit as a more reliable picture of a business than accounting profit alone. Those studies scale by total assets rather than net income: their measure, cash-based operating profitability, is shown in the last column and ranked in our Cash Profitability Ranking. The studies looked at large samples of US companies over many decades; their findings vary across periods, and several have weakened since publication.

Who is included: companies whose filings pass our data-quality checks, that report stock-based compensation, and whose net income is positive and at least 5% of revenue. Below that, the ratio swings wildly on small profits and stops meaning anything.

A new edition is published each calendar quarter; past editions are kept unchanged. Observations, not recommendations.