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Scouring the markets for companies that trade at low multiples of book value is often a futile exercise, as book value bargains tend to have either lots of debt or money-losing businesses. Excess financial leverage typically means that a book value bargain is a distressed equity in danger of going bankrupt or having to raise additional equity capital in a massively dilutive way. Meanwhile, companies that bleed money erode book value over time, rending them progressively less cheap based on the price-to-book metric. These types of stocks often end up being "value traps," companies that look cheap initially but whose stock price can remain depressed for a long time because intrinsic value is stagnating or even eroding over time.

As value investors, screening for book value bargains is an essential tool in our idea generation box. However, we like to look for companies that are cheap while also having solid balance sheets and real prospects for making money going forward. The following are seven companies that meet these criteria:

A. H. Belo (AHC) ($6.64 per share; MV $143 million; EV $91 million), based in Dallas, TX, publishes four daily newspapers, including the Dallas Morning News, Texas' leading newspaper, the Providence Journal, the oldest continuously-published newspaper in the U.S., and the Press-Enterprise, serving the inland Southern California region. Daily circulation of the company's newspapers and niche publications decreased 2% from 684K in 2009 to 671K in 2010, while total revenue declined 6% during the same period. Analysts expect A. H. Belo to earn $0.21 per share in 2011 (32x P/E), followed by $0.55 (12x) and $0.70 (9x) in each of the next two years, respectively. The company has $52 million of net cash and $149 million of tangible book value.

Axcelis Technologies (ACLS) ($1.61 per share; MV $171 million; EV $126 million), based in Beverly, MA, provides ion implantation and cleaning systems for the semiconductor industry. Analysts expect Axcelis to earn $0.11 per share in 2011 (15x P/E) and $0.24 in 2012 (7x). The company has $45 million of net cash and $210 million of tangible book value. CEO Mary Puma recently claimed that "Axcelis is off to a solid start in 2011," but Mr. Market apparently disagrees. In fact, some may question Ms. Puma's nearly decade-long stewardship of the company due to a long record of shareholder value destruction.

Build-A-Bear (BBW) ($6.35 per share; MV $124 million; EV $79 million), based in St. Louis, MO, offers an interactive make-your-own stuffed animal retail-entertainment experience. The number of Build-A-Bear retail stores in North America and Europe stayed roughly flat, going from 345 in 2009 to 344 in 2010. Analysts expect Build-A-Bear to lose $0.06 per share in 2011, followed by EPS of $0.22 (29x P/E) and $0.50 (13x) in each of the next two years, respectively. The company has $45 million of net cash and $121 million of tangible book value. Management spent $2.5 million to repurchase 375,000 shares in Q1.

Gaiam (GAIA) ($4.40 per share; MV $103 million; EV $72 million), based in Broomfield, CO, provides lifestyle media and fitness accessories with an emphasis on health and wellness. Analysts expect Gaiam to earn $0.22 per share in 2011 (20x P/E), followed by $0.29 (15x) and $0.45 (10x) in each of the next two years, respectively. The company has $31 million of net cash and $109 million of tangible book value.

Imation (IMN) ($8.55 per share; MV $331 million; EV $45 million), based in Oakdale, MN, provides a portfolio of data storage and security products, electronics and accessories under the Imation, Memorex, XtremeMac, and TDK Life on Record brands. The number of employees declined 8% from 1,210 in 2009 to 1,115 in 2010, while revenue declined 11% during the same period. Analysts expect Imation to lose $0.37 per share in 2011 and $0.01 in 2012 (>99x P/E). The company has $286 million of net cash and $465 million of tangible book value.

Tellabs (TLAB) ($4.04 per share; MV $1.5 billion; EV $411 million), based in Naperville, IL, provides products that enable communication service providers to deliver wireless and wireline voice, data and video to their customers. R&D spending rose 12% from 269 million in 2009 to 300 million in 2010, while revenue increased 8% during the same period. Analysts expect Tellabs to lose $0.08 per share in 2011, followed by EPS of $0.02 (>99x P/E) and $0.17 (24x) in each of the next two years, respectively. The company has $1.1 billion of net cash and $1.6 billion of tangible book value.

Xyratex (XRTX) ($8.99 per share; MV $272 million; EV $174 million), based in Havant, United Kingdom, provider enterprise data storage subsystems and hard disk drive capital equipment to OEMs. R&D spending rose 30% from $71 million in 2009 to $93 million in 2010, while revenue surged 85% during the same period. Analysts expect Xyratex to earn $0.94 per share in the fiscal year ending November 30, 2011 (10x P/E) and $1.59 in 2012 (6x). The company has $98 million of net cash and $361 million of tangible book value. Xyratex shares plummeted in January after management provided a tepid business outlook.

Source: 7 Book Value Bargains With Cash-Rich Balance Sheets