Cash flow is what matters, not earnings.

Cash flow is the true measure of a company's financial performance, not reported earnings per share.

http://spreadsheets.google.com/pub?key=tN-V5a_7mURGCfW1tcwuQPw&output=html

http://spreadsheets.google.com/pub?key=tufSQpXxzs0bnXVndLmEitA&output=html

At the end of the day, cash flow is what matters, not earnings.

For a host of reasons, accounting-based earnings per share can be made to say just about whatever a company's management wants them to, but cash flow is much harder to fiddle with. 

The statement of cash flows can yield a ton of insight into the true health of a business, and you can spot a lot of blowups before they happen by simply watching the trend of operating cash flow relative to earnings.  One hint:  If operating cash flows stagnate or shrink even as earnings grow, it's likely that something is rotten.



Also read:
Using Yield-based measures to value stocks: Say Yes to Yield
http://myinvestingnotes.blogspot.com/2010/01/using-yield-based-measures-to-value.html