I look over hundreds of financial statements week in and week out, and I’ve come to one important conclusion:

There’s a lot of unintentional financial trickery that goes on when corporations report their annual financial performance.

#-ad_banner-#It’s a simple result of the fact that financial reporting has become so complex that few people — even those preparing the numbers — truly understand what’s behind the figures.

And while on some level that’s concerning, I think it actually creates a major opportunity for investors who are willing to dig into the numbers and find out what they really mean.

Let me show you.

Most corporate financial announcements usually focus on one number: earnings.

They typically compare this figure to the previous quarter or the year-ago period (ex. “profits were down 5% as compared to Q1 2014”).

Now don’t get me wrong, it is an important metric, but here’s the problem: earnings are affected by a lot of things that may or may not make a difference to the business, such as non-cash charges for things like stock options or depreciation of equipment.

So when you rely strictly on earnings as the basis for how you view a particular company, you may not be getting the full story.

That’s why digging a little deeper can give you an advantage over your fellow investors. You see, long-time readers of my premium advisory Top 10 Stocks know what one of my go-to metrics for analyzing any company is cash flow.

Unlike earnings, cash flow isn’t something that can be diluted. It only measures exactly how much cold hard cash is coming into a company’s coffers at any time, plain and simple.

That’s why when investors ignore a company with lower-than-expected earnings; they may be missing out on a successful firm that’s actually hoarding boatloads of cash.

Case-in-point: Cisco Systems (Nasdaq: CSCO).

Now most investors would look at Cisco’s income statement and see cause for concern. After all the company’s revenue fell 3% in 2014, while earnings fell more than 21%.

But only focusing on these “front page” figures doesn’t give the whole story.

Further research into Cisco’s financial documents reveals the company is currently sitting on a $52 billion mountain of cash. And the firm certainly hasn’t been shy about returning that cash to its shareholders.

In its 2014 fiscal year (the twelve months ending July 31, 2014), Cisco paid out $3.8 billion in dividends — up more than 13% from the $3.3 billion it paid the year prior.

As you can see in the chart below, the company has increased its dividend payout each year since its 2011 fiscal year:
 

In its last fiscal year, Cisco paid $0.72 per share in dividends — good for a 2.9% yield. But considering the company’s dividend increased 500% in the past three years, I’d wager that yield will continue to rise for investors savvy enough to look past Cisco’s decreased earnings.

But Cisco isn’t the only firm I’ve come across whose earnings are “misleading” potential investors.

Another company I found saw fairly underwhelming results in its 2014 financial report. Earnings were down 10% compared to the prior year.

And when the firm released its first-quarter results this year, the picture was even bleaker. Revenues were down 17% compared with the year-ago period. Earnings appeared even worse, down 29%.

Disappointing numbers like these have kept this stock trading sideways for most of the last four years. But here’s the thing, when you look deeper into the company’s financial statements, the story changes completely.

In 2014, the firm’s cash flows increased 8% to $3.5 billion. Moreover, this was actually a record year — with the firm posting its highest-ever annual cash flows.

And the story gets better. When you look at trailing twelve-month (TTM) cash flows — which include the first quarter of 2015 — it’s apparent the company’s cash flows are continuing to grow. The company’s TTM operating cash flow figure rose 19% as compared with 2014 figures, to $4.2 billion.

This is nothing new either. Since 2006 the company has been seeing a pattern of rising cash flows. In fact the TTM figures suggest the firm is on pace to post 286% growth in cash flows over the past decade.

Now, if the street was seeing that sort of growth in the company’s earnings figures, this stock would have doubled, tripled or more over the last few years. But as I said, the stock has been trading sideways for years now — meaning you can buy the stock today at the same price it was selling for in early 2011, despite the fact that cash flows are up 65% since then.

That’s a situation I like a lot: a firm with more and more cash coming in the door, which is being ignored by investors.

And new data are showing me that this company’s industry may be on the verge of a major comeback, potentially putting even more firepower behind the firm’s financial performance. I don’t have time to tell you more about this company today, but I’ve prepared a special gift for StreetAuthority Daily readers.

StreetAuthority’s income expert Amy Calistri recently sat down with me for an exclusive 30-minute interview about three other major market events that Wall Street pundits are completely missing. These overlooked revolutions could make early investors sizeable profits and I reveal three of my favorite ways to capitalize.

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