6 Low-Debt Small Cap Stocks Trading For Cheap

by: ZetaKap

It is understandable that some companies, especially at the small cap stage, are willing to take on debt in order to grow the business. While that debt can provide the necessary cash to implement strategic goals, it can also limit options if it becomes unmanageable. To find small caps that are well positioned for growth, it makes sense to screen for those that have minimal debt. We developed a list of small cap stocks with that trait and also appear to be trading below perceived market value. Take a look at the summaries below to begin your investigation.

The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.

The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firm's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share.

We first looked for small-cap stocks. We then looked for companies that operate with little to no long-term debt (Long Term D/E Ratio<.1). We then screened for businesses that have maintained a sound capital structure (D/E Ratio<.1). We then looked for businesses that are undervalued (P/BV<1)(P/CFO<10). We did not screen out any sectors.

Do you think these small-cap stocks failed to price their value accurately? Use our list to help with your own analysis.

1) BBVA Banco Frances S.A. (NYSE:BFR)

Sector Financial
Industry Foreign Regional Banks
Market Cap $657.95M
Beta 1.65
Click to enlarge

BFR stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Price/Book Value Ratio 0.74
Price/Cash Flow Ratio 0.45
Short Interest 1.17%
Click to enlarge

BBVA Banco Francs S.A., together with its subsidiaries, provides various financial services to corporations, medium and small companies, and individual customers in the Republic of Argentina. The company offers checking and savings accounts, time deposits, and investment accounts. It also provides short and long-term loans to companies, overdraft lines of credit, discounted instruments, loans to financial institutions and the governmental sector, collateral loans, and real estate mortgage, as well as consumer loans comprising credit card loans and other consumer loans.

2) American National Insurance Co. (NASDAQ:ANAT)

Sector Financial
Industry Property & Casualty Insurance
Market Cap $1.87B
Beta 1.25
Click to enlarge

ANAT stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.02
Price/Book Value Ratio 0.50
Price/Cash Flow Ratio 12.38
Short Interest 0.07%
Click to enlarge

American National Insurance Company, together with its subsidiaries, provides insurance products and services in the United States, the District of Columbia, Puerto Rico, Guam, and American Samoa. The company's Life segment offers individual and group life insurance products, including whole life, term life, variable universal life, and universal life; and credit life insurance. Its Annuity segment distributes fixed annuities comprising single premium deferred annuities, equity-indexed deferred annuities, and single premium immediate annuities to individuals and small businesses. The company's Health segment offers medicare supplement, supplemental insurance, medical expense, stop-loss, and credit disability insurance.

3) National Western Life Insurance Company (NASDAQ:NWLI)

Sector Financial
Industry Life Insurance
Market Cap $511.87M
Beta 1.21
Click to enlarge

NWLI stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Price/Book Value Ratio 0.38
Price/Cash Flow Ratio 4.60
Short Interest 3.16%
Click to enlarge

National Western Life Insurance Company provides life insurance products for the savings and protection needs of policyholders and annuity contracts for the asset accumulation and retirement needs of contract holders. Its life products include universal life insurance and interest-sensitive whole life, as well as traditional products, such as term insurance coverage; and annuity products comprise flexible premium and single premium deferred annuities, fixed indexed annuities, and single premium immediate annuities. The company markets and distributes its insurance products primarily through independent national marketing organizations to residents of various countries in central and South America, the Caribbean, the Pacific Rim, eastern Europe, and Asia.

4) Fushi Copperweld, Inc. (NASDAQ:FSIN)

Sector Industrial Goods
Industry Industrial Electrical Equipment
Market Cap $346.77M
Beta 1.66
Click to enlarge

FSIN stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.02
Debt/Equity Ratio 0.03
Price/Book Value Ratio 0.85
Price/Cash Flow Ratio 1.71
Short Interest 11.20%
Click to enlarge

Fushi Copperweld, Inc., through its subsidiaries, engages in designing, developing, manufacturing, marketing, and distributing copper-clad bimetallic wire products, principally copper-clad aluminum and copper-clad steel. The company offers its products for use in grounding applications, power cables, magnet wires, electrified railroad catenary cables, and tracer wires in the utility market; and within catenary cable for electrified rail applications, as well as in automobiles, trucks, motorcycles, commercial off road equipment, and trailers. It is also involved in the production and sale of power cables.

5) Tech Data Corp. (NASDAQ:TECD)

Sector Services
Industry Computers Wholesale
Market Cap $1.96B
Beta 1.39
Click to enlarge

TECD stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.03
Debt/Equity Ratio 0.04
Price/Book Value Ratio 1.00
Price/Cash Flow Ratio 4.39
Short Interest 7.05%
Click to enlarge

Tech Data Corporation engages in the wholesale distribution of technology products in North America, South America, Europe, the Middle East, and Africa. It distributes and markets approximately 150,000 products, including computer peripherals, physical security, consumer electronics, digital signage, and mobility hardware, as well as provides logistics management services. The company also provides a range of services, such as training and technical support, customized shipping documents, product configuration/integration, and access to flexible financing programs, as well as a suite of electronic commerce tools comprising Internet order entry and electric data interchange services. It serves approximately 125,000 value-added resellers, direct marketers, retailers, and corporate resellers.

6) Avid Technology, Inc. (NASDAQ:AVID)

Sector Technology
Industry Multimedia & Graphics Software
Market Cap $350.04M
Beta 1.17
Click to enlarge

AVID stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Price/Book Value Ratio 0.96
Price/Cash Flow Ratio 5.89
Short Interest 5.07%
Click to enlarge

Avid Technology, Inc. provides digital media content-creation products and solutions for audio, film, video, broadcast professionals, artists, and creative enthusiasts in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company offers various software and hardware professional video-editing solutions, including Media Composer product line, which is used to edit television programs, commercials, and films; NewsCutter and iNews Instinct editors for news production; and Avid Symphony Nitris DX and Avid DS, which are used during the online or finishing stage of post production.

The company also provides Pinnacle Studio and Avid Studio, which provide consumers and entry-level videographers with the ability to create professional-looking videos; broadcast newsroom graphics, ingest, play-to-air, and automation device control solutions that assist broadcasters as they bring programs from concept to air; and Avid ISIS shared storage system to store, share and manage large quantities of digital media assets.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/22/2012.

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

Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.