Companies of the small cap size that do not have cash reserves and are highly leveraged don't have much of a chance of making it to the next level. Even the slightest of obstacles can derail a company with these traits. To achieve growth, especially at the small cap level, a company has to have funding on hand. With this in mind, we searched or small-cap industrial stocks that have significant cash reserves. Cash can help a company when the unexpected occurs, both in terms of unforeseen expenses or opportunities for strategic acquisitions. In addition, all of the stocks in our list today have minimal debt, which provides a company with the necessary flexibility to foster growth. If this sounds appealing to you, then you will be interested in the list below.
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 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 the company is to meet current obligations using liquid assets).
We first looked for small cap industrial stocks. We then screened for businesses that operate with little to no debt (D/E Ratio < 0.1). Next, we then screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2).
Do you think these small-cap stocks are worth more than their current valuations? Use our screened list as a starting point for your own analysis.
1) AeroVironment, Inc. (AVAV)
|Industry||Aerospace/Defense Products & Services|
AeroVironment, Inc. engages in the design, development, production, support, and operation of unmanned aircraft systems, and efficient energy systems for various industries and governmental agencies. It offers small unmanned aircraft systems (UAS), which provide ISR and communications, including real-time tactical reconnaissance, tracking, combat assessment, and geographic data to the small tactical unit or individual war fighter. The small UAS wirelessly transmit critical live video and other information to a hand-held ground control unit, enabling the operator to view and capture images. The company also provides spare equipment, alternative payload modules, batteries, chargers, repair services, and customer support services for small UAS. In addition, it offers electric vehicle charging systems for passenger and fleet vehicles; PosiCharge industrial electric vehicle charging systems for electric material handling vehicles and airport ground support equipment; and power cycling and test systems for developers and manufacturers of electric vehicles, as well as battery packs, electric motors, and fuel cells. Further, the company provides contract engineering services; and advanced battery module and pack testing services to automotive and battery manufacturers in support of their electric and hybrid electric vehicle development programs. AeroVironment, Inc. sells its products to organizations within the Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, and Air Force, as well as to commercial, consumer, and government customers. The company was incorporated in 1971 and is headquartered in Monrovia, California.
2) Lindsay Corporation (LNN)
|Industry||Farm & Construction Machinery|
Lindsay Corporation designs, manufactures, and sells irrigation systems that are primarily used in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor in the United States and internationally. It also manufactures and markets various infrastructure products. The company's Irrigation segment manufactures and markets center pivot, lateral move, and hose reel irrigation systems; irrigation controls, chemical injection systems, and remote monitoring and control systems; and water pumping stations and controls, as well as repair and replacement parts. This segment also provides mini-pivots and hose reel travelers, as well as markets pivot monitoring and control systems, which include remote telemetry and a Web or personal computer hosted data acquisition and monitoring application. Its Infrastructure segment offers Quickchange Moveable Barrier systems that help in highway reconstruction, paving and resurfacing, road widening, median and shoulder construction, and tunnel and bridge repairing; and redirective and non-redirective crash cushions, which are used to enhance highway safety at locations, such as toll booths, freeway off-ramps, medians and roadside barrier ends, bridge supports, utility poles, and other fixed roadway hazards. This segment also provides specialty barrier products that offer portability and flexibility in setting up and modifying barriers in work areas, and provide quick opening, high containment gates for use in median or roadside barriers; and road marking and road safety equipment. In addition, Infrastructure segment offers diameter steel tubing, railroad signals, and structures; and outsourced manufacturing and production services for other companies. The company serves departments of transportation, municipal transportation road agencies, roadway contractors, subcontractors, distributors, and dealers. Lindsay Corporation was founded in 1954 and is based in Omaha, Nebraska.
3) Cascade Corp. (CASC)
|Industry||Farm & Construction Machinery|
Cascade Corporation engages in the manufacture and distribution of materials handling load engagement devices and related replacement parts under the Cascade name primarily for the lift truck and construction industries worldwide. It offers lift truck related products that are designed to handle loads with pallets and for specialized application loads without pallets; and specialized products, which include devices specifically designed to handle appliances, carpet and paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, and plywood, as well as boxed, packaged, and containerized products. The company also provides construction related products to enable loaders, backhoes, and rough terrain lift trucks to move materials, as well as for use on excavators and loaders for conventional and specialized ground engagement applications. Its customers include lift truck original equipment manufacturers (OEM), original equipment dealers, and distributors; and OEMs who manufacture construction, mining, agricultural, and industrial vehicles. The company sells its products to the end-users through the retail lift truck dealer distribution channel and to lift truck manufacturers as OEM equipment. It serves various industries, such pulp and paper, grocery products, textiles, recycling, and general consumer goods industries; and construction markets, including infrastructure, demolition, recycling, forestry, utility, and general construction. The company was founded in 1943 and is headquartered in Fairview, Oregon.
4) Zebra Technologies Corp. (ZBRA)
Zebra Technologies Corporation offers products and solutions that assist in identifying, authenticating, and tracking assets, people, and transactions. The company's products include direct thermal and thermal transfer label and receipt printers, radio frequency identification printer/encoders, dye sublimation card printers, real-time location solutions, and related accessories and support software. It also designs, manufactures, and sells specialty printing devices that print variable information on demand at the point of issuance. The company offers its printers to print bar code labels, receipts, plastic identification cards, wristbands, and tags, as well as to encode passive RFID smart labels and cards. In addition, it provides printer management, label design, and driver solutions under the ZebraNet brand name. The company's printer supplies consist of stock and customized thermal labels, wristbands, plastic cards, card laminates, and thermal transfer ribbons. Its products have applications in inventory control, small package delivery, baggage handling, automated warehousing, just-in-time manufacturing, employee time and attendance records, file management systems, patient barcode wrist banding, medical specimen labeling, shop floor control, in-store product labeling, employee ID cards, driver's licenses, and access control systems. The company sells its products worldwide through distributors, value-added resellers, and original equipment manufacturers. Zebra Technologies Corporation was founded in 1969 and is headquartered in Lincolnshire, Illinois.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/24/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.