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Companies whose shares trade on Wall Street report their winnings to the public each quarter -- not once, but twice. Stock investors tend to obsess over one measure, earnings. Bankers tend to watch another, free cash flow. Stock investors ought to watch both, however, because differences between them can help predict future returns.

Free cash is easy to understand. It's the amount of money a company takes in each quarter (or pays out). Earnings are the funds a company would clear if, among other things, its costs paired off neatly each quarter with related revenues. In reality, companies often pay for raw materials in one quarter and sell them as finished goods in another, and they make lump-sum investments in plants and machines that generate cash over many years. Free cash flow is lumpy but real, while earnings are tidy but contrived. Over time, the two measures should tell roughly the same story. In the short term, they can differ by a lot.

Crucially, research by Richard Sloan at U.C. Berkeley and others suggests earnings are more likely to revert to the level of free cash flow than the other way around. In other words, for a company that's reporting $1.50 a year in earnings while clearing only 80 cents a year in free cash flow, there's a good chance that earnings are headed for a tumble. Since the herd tends to price shares according to earnings rather than free cash flow, shares of such a company are likely to disappoint, too. The opposite is also true. Companies with ample free cash flow but skimpy profits tend to report robust earnings growth in coming quarters, and their shares tend to outperform.

Below are listed three companies with free cash flow over the past year that exceeded paper earnings by at least 20%. Each pays a dividend and increased its sales last quarter.

P.F. Chang's China Bistro

Free cash flow per share (past four quarters): $3.28
Earnings per share: $2.10
Dividend yield: 2.1%

P.F. Chang's (PFCB) is growing slowly. Last quarter, the company increased sales at just 2.3% versus a year earlier. Sales at longstanding stores rose only fractionally. Management expects sales for the full year to increase just 3% to 4% and earnings per share 7% to 9%. Numbers like those have failed to impress investors. The stock has lost one-fifth of its value this year. Bargain hunters might want to have a look. Management has slowed the pace of new store openings to a crawl, which has resulted in meager sales gains but plenty of extra funds. Free cash flow equals about 10% of the company's stock market value, which makes its 2.1% dividend yield seem plenty affordable.

Humana

Free cash flow per share: $11.96
Earnings per share: $6.81
Dividend yield: 1.3%

Looming health care changes will result in millions of more customers for private insurers, but are also meant to force insurers to spend an adequate portion of their premiums on care. Is that a net positive or negative for the industry? If you're in doubt, look at Aetna (AET), whose shares are up more than 80% over the past two years, and Cigna (CI), whose stock price has more than doubled. Humana (HUM) has topped both of them, despite drawing just 10% to 15% of its business from commercial customers for now. In February, the company announced the extension of a large military contract. Last month, it significantly increased its earnings guidance. Low medical costs have left the company awash in spare cash. It recently announced its first dividend since 1993 and its board approved $1 billion for share repurchases, replacing a $250 million plan.

Waste Connections

Free cash flow per share: $1.70
Earnings per share: $1.24
Dividend yield: 1.0%

Waste Connections (WCN) hauls trash for residential and commercial customers in the West and South, focusing on non-city markets with limited competition. Last quarter the company reported 8% sales growth and beat Wall Street's earnings forecasts. Analysts say it should generate about $240 million in free cash this year. That's 7% of its stock market value. Shares are up more than 30% in a year, adjusted for a 3-for-2 split in November.