Let's say Company A and Company B both make $1000 / year, and have been growing their profits at 10% per year. Company A and Company B are in the same industry and are similar, except for the fact that Company A has assets worth $500, while Company B has assets of $2000. Assuming they were selling for the same price, which company would you rather own?
It may seem like Company B is more desirable. After all, who wouldn't want to own $2000 worth of assets rather than $500? But actually, if you believe in the growth prospects of this industry, Company A is the better investment! It comes down to "return on assets" (which is sometimes substituted for it's cousin, return on invested capital), which is a measure of what kind of return an investor gets on his money.
For each dollar Company A invests in its assets, it gets $2 in earnings, while Company B only manages 50 cents. If these companies were to grow their earnings by $100 this year, the owner of Company A would only have to invest $50 for that return. On the other hand, the owner of Company B would have to invest $200, which eats up quite a chunk of his $1000 profit.
All too often, investors see growth in a company's future, but fail to consider the costs of that growth. All companies require investments in assets in order to support growth, whether it's in the form of fixed assets, accounts receivable or inventory. The companies with the best return on assets (or return on invested capital) are the ones that reward their investors with cash, not just paper profits.