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When the direction of the world economy is unclear, industrial stocks are not the most sought after of sectors. However, savvy investors make money by looking where other investors aren't. That's exactly why we screened for industrial stocks. Today we identified some industrial stocks with strong cash reserves, meaning that these companies are well positioned to cover their expenses and possibly make strategic investments or acquisitions. But money in hand isn't enough to warrant investment; we also looked for companies with strong profits filling those cash reserves. Under these criteria, we came up with a pretty interesting list of industrial stocks.

The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.

The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue

We first looked for small cap industrial stocks. We then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). From here, we then looked for companies that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(Net Margin [TTM] >10%).

Do you think these small-cap stocks hold value that has yet to be priced in? Use this list as a starting-off point for your own analysis.

1) Ceradyne Inc. (CRDN)

Sector:Industrial Goods
Industry:Industrial Equipment & Components
Market Cap:$651.19M
Beta:1.42

Ceradyne Inc. has a Current Ratio of 3.50, a Quick Ratio of 2.61, a Earnings Per Share Growth Rate of 193.30%, and a Net Margin of 12.13%. The short interest was 6.95% as of 06/21/2012. Ceradyne, Inc. engages in the development, manufacture, and market of technical ceramic products, ceramic powders, and components in the United States and internationally. Its products include lightweight ceramic armor and combat helmets for soldiers and other military applications; ceramic industrial components for erosion and corrosion resistant applications; ceramic powders, including boron carbide, boron nitride, titanium diboride, calcium hexaboride, zirconium diboride, and fused silica, which are used in manufacturing armor and a range of industrial and consumer products; evaporation boats for metallization of materials for food packaging; and ceramic diesel engine components. The company also offers functional and frictional coatings primarily for automotive applications; translucent ceramic orthodontic brackets; ceramic crucibles for melting silicon in the photovoltaic solar cell manufacturing process; ceramic-impregnated dispenser cathodes for microwave tubes, lasers, and cathode ray tubes; specialty glass compositions for solar, electronic, industrial, and health care markets; ceramic missile radomes for the defense industry; and fused silica powders for precision investment casting.

2) Polypore International Inc. (NYSE:PPO)

Sector:Industrial Goods
Industry:Industrial Equipment & Components
Market Cap:$1.81B
Beta:1.84

Polypore International Inc. has a Current Ratio of 3.52, a Quick Ratio of 2.38, a Earnings Per Share Growth Rate of 60.72%, and a Net Margin of 13.09%. The short interest was 33.97% as of 06/21/2012. Polypore International, Inc., a technology filtration company, develops, manufactures, and markets specialized microporous membranes used in separation and filtration processes. It operates in two segments, Energy Storage and Separations Media. The Energy Storage segment offers membranes that provide the function of separating the cathode and anode in applications, including lithium-ion batteries that are used in portable electronic devices, energy storage systems, cordless power tools, and electric drive vehicles; and lead-acid batteries used in automobiles, other motor vehicles, forklifts, and uninterruptible power supply systems.

3) Littelfuse Inc. (NASDAQ:LFUS)

Sector:Industrial Goods
Industry:Industrial Electrical Equipment
Market Cap:$1.33B
Beta:1.85

Littelfuse Inc. has a Current Ratio of 2.53, a Quick Ratio of 2.06, a Earnings Per Share Growth Rate of 10.62%, and a Net Margin of 12.66%. The short interest was 3.67% as of 06/21/2012. Littelfuse, Inc. designs, manufactures, and sells circuit protection devices in the Americas, Europe, and the Asia-Pacific. The company's Electronics segment provides circuit protection components, including fuses and protectors, positive temperature coefficient resettable fuses, varistors, polymer electrostatic discharge suppressors, discrete transient voltage suppression diodes, TVS diode arrays and protection thyristors, gas discharge tubes, and power switching components, as well as fuseholders, blocks, and related accessories used in mobile phones, flat-screen TVs, computers, telecommunications equipment, modems, data transmission lines, and alarm systems. This segment sells its products under the PICO II, NANO2 SMF, PulseGuard, TECCOR, SIDACtor, Battrax, and SPA brand names.

4) Robbins & Myers Inc. (NYSE:RBN)

Sector:Industrial Goods
Industry:Diversified Machinery
Market Cap:$1.96B
Beta:1.20

Robbins & Myers Inc. has a Current Ratio of 3.09, a Quick Ratio of 2.17, a Earnings Per Share Growth Rate of 118.30%, and a Net Margin of 13.01%. The short interest was 5.77% as of 06/21/2012. Robbins & Myers, Inc., together with its subsidiaries, engages in the design, manufacture, and marketing of engineered, application-critical equipment and systems for the energy, industrial, chemical, and pharmaceutical markets worldwide. The company's Fluid Management segment designs, manufactures, markets, repairs, and services equipment and systems for use in oil and gas exploration and recovery, specialty chemical, wastewater treatment, and other industrial applications. This segment's products and systems include hydraulic drilling power sections; blow-out preventers; pressure control systems; wellhead equipment; frac manifolds and trees; high pressure engineered gate valves; down-hole and industrial progressing cavity pumps and related products, such as grinders for applications involving the flow of slurries and sludge; fluid-agitation equipment and systems; and various ancillary equipment for the energy sector consisting of rod guides, rod and tubing rotators, wellhead systems, pipeline closure products, and valves.

*Company profiles were sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 4 Profitable Small Cap Industrials Filling Up Their Cash Reserves