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TheStreet Open House

Dykstra: Cash Flow Is Ka-Ching King

Tough opening day for the defending World Series champ Phillies on Sunday: The Atlanta Braves cooled the Phillies' jets, beating them 4-1. And in Baltimore on Monday, the Yankees' brand new, high-paid talent -- in the harsh glare of the spotlight -- couldn't stave off an opening day loss to the Orioles, 10-5.

Everyone feels like they've got a lot to live up to. But now that opening-day jitters are behind them, everyone can relax and play some ball.

I don't get jitters when picking stocks for my deep-in-the-money options trading system. You can follow my system -- which has a win record of 99-1 -- through a subscription to my Nails on the Numbers newsletter. One of my key measures in evaluating a pick is its cash flow.

Operating cash flow is reported in big, round numbers that need some context to see how good they really are. So today, let's look at the operating cash flow ratio, which is a company's operating cash flow divided by its current liabilities. What this gives us is a measure of how well a stock's cash flow covers its current liabilities.

The higher the ratio, the better. But few companies can approach a ratio of 1.0. Rather, many have cash-flow ratios that are near zero. But let's look at some cash-flow winners. Pfizer (PFE - Get Report), which won for me in October, had operating cash flow of $5.97 billion in December. With current liabilities of $27 billion, the pharmaceuticals giant had an operating cash-flow-to-current liabilities ratio of 0.22 that quarter. That is up from a ratio of 0.17 for the same quarter of the prior year.

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