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Some companies slip under the radar for investors simply because what they offer is not exciting or groundbreaking. Yet, they may be solid, well-managed businesses that are good value for money. I think Acme United Corporation (NYSEMKT:ACU) is one such company. Its strong fundamentals, reasonable valuation, tactical acquisitions, strategic partnerships and pool of intellectual property, make this low profile business interesting.

Business: Through its brands Westcott, Clauss, Camillus, Physician's care and Pac Kit, the company sells cutting and measuring tools and safety supplies for a variety of uses in homes, offices, industries, hospitals and schools. Typical products of the company include scissors, knives, sharpeners, paper trimmers, medical cutting instruments, measuring instruments, first aid kits and the like. It employs 171 full time employees and operates in the United States, Asia, Canada and Europe through wholesale and retail distributors, hardware stores, office supply stores and so on. In 2012 it generated revenues of $84.4 million with 80 percent of its total sales attributed to the U.S. segment (which includes Asia), and 10% each to Europe and Canada. Its import sales to the U.S. from its Asian business have been growing as a percent of total sales from 16% in 2012 to 22% in 2013.

Financial Performance: The Company reported robust growth in Q3 2013 as net sales grew nearly 9% and gross profit expanded by almost 7% year-over-year. The five year annualized revenue growth rate has been nearly 6%. Net income and earnings per share also advanced over 20% and 15% in the same period from a year ago. Net cash from operating activities was at $3 million at year-end September 2013, compared with a negative $1.4 million balance in 2012. The net debt position of the company also improved to $13.2 million by Q3, down about a million dollars from the prior year.

While the U.S. segment sales grew by nearly 10% and sales in Europe witnessed a robust 26% growth, sales in the Canadian segment declined due to weakness in the office products business and losses from some large accounts. However, the U.S. segment was bolstered by improved performance in Camillus knives sales, growth in first aid kits and stronger back to school sales. In the European segment the strong growth was fuelled by increases in mass market retail of knives for kitchen use, new distribution by signing on a large German distributor and expansion into Scandinavia.

The company declared a cash dividend of 8 cents per share in December in line with previous, which has been growing at a five year annualized growth rate of almost 17%.

Valuation Multiples: From a price to earnings ratio perspective, the company trades at a reasonable multiple of 12.44 which is lower than the industry average. The price to book ratio is also below 1.5 while the price to sales is a modest 0.55, which is below the industry average of 1.11 and much below one of its direct competitors, Johnson and Johnson (NYSE:JNJ).

Tactical Acquisitions: The Company has been making moves to grow and diversify its business through a series of acquisitions and strategic partnerships. In 2011 it acquired Pac-Kit, one of the oldest brands in the first-aid kit business, for $3.4 million. The first-aid kit business has been one of the strong performers for the company and it has since been moving forward in producing hazard protection kits for disaster management.

This was followed by the acquisition of the C Thru Ruler Company in 2012 for which the company paid $1.47 million for inventory and intellectual property. It produces transparent measuring instruments which has increased the company's exposure to students, schoolteachers and scrap bookers.

In 2013 the company acquired a new, 340,000 square feet manufacturing and distribution facility in North Carolina for $2.8 million that is meant to consolidate two distribution centers and improve operational efficiency. While the company had duplicate operating costs of two facilities as it upgraded the new purchase, in the long run it provides additional space to expand operations and /or store inventory. After adding in the price of updates to the purchase price the facility will cost the company upwards of $4 million, but has been estimated to have a replacement cost of $13.5 million, potentially making it a bargain buy for the company.

Each subsequent acquisition that the company makes provides it with another step forward towards diversifying its product offering and customer base and creating capacity to fulfil future demand growth. Since it operates in an industry with low barriers to entry, this broader customer base and brand familiarity for customers could be useful to compete.

Innovation and Partnerships: The business of Acme United may not sound thrilling, but it too calls for product innovation and thoughtful design. Along these lines the company has continued to develop new and improved products like titanium coated non-stick cutting tools for better performance, measuring instruments with non-microbial coating and new disaster survival kits. It continues to invest in R&D and maintains several patents and trademarks that are critical for business preservation and brand recognition.

An innovative marketing strategy has been to partner with survivalist Les Stroud to develop and design survival tools, knives, etc. This adds a touch of adventure and excitement to the business and uses the celebrity survivalist's reputation to reach out to a new group of customers.

Another astute liaison emerged between Scott's Miracle Gro and Acme United in 2013 when the two companies entered into a licensing partnership to develop two new types of garden tools, namely, Scotts Air Shoc and Miracle Gro Environline. This provides Scotts the opportunity to expand its repertoire to garden tools, while for Acme it is another avenue to increase sales and become more visible to the established customer base of another retailer.

Seasonality: One of the challenges for the Company is the seasonal nature of its sales, primarily due to timing of back to school sales. It typically performs better in the second and third quarters of the year. However there may be very early indications of some shift in this seasonality in favor of the company. The fourth quarter has benefited from Christmas promotions of Camillus knives and hunting knife sets, while the industrial safety kit business has been boosting growth in each quarter.

Overall: Acme United is a company that has been maintaining strong financial performance, paying dividends to its shareholders and growing its operations domestically and internationally. Its products are easy to understand, and while it faces competitors like Fiskars and Johnson and Johnson, it has a well established reputation in its lines of business. At the time of writing the stock was trading at $15.30 which was above the 20 and 50 day moving averages and near a simple resistance bound of the past three month's high points. Given recent performance and strategies for future growth, I think that this low profile company has the potential to be a good value for money.

Disclaimer: I am a self-taught individual investor and this article expresses my views based on my own research and is not professional investment advice. I am not being influenced or paid by any organization to write this article.

Source: Acme United Corporation - Value In Simplicity