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  • 3 Cash-Heavy Small Cap Industrial Stocks Holding Down The Debt  0 comments
    Sep 12, 2012 11:29 AM | about stocks: GLPW, MLI, MTRX

    Most investors recognize that it takes hard work and discipline to make a company successful. Often it boils down to wise fiscal controls to guide decisions. Companies that build up a cash reserve demonstrate their understanding that business doesn't always go as planned. They also know that a high level of liquidity allows a company to make strategic moves that may require additional funds. With this in mind, we developed a short list of industrial small cap stocks that have substantial cash reserves. In addition, they have minimal debt which further highlights their strong fiscal oversight. Take a look at the list below to see if any of these small cap industrial stocks speak to you.

    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 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).

    We first looked for small cap industrial stocks. We then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1). We then looked for companies that operate with little to no debt (D/E Ratio<.1). From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2).

    Do you think these small-cap stocks are worth more than the market currently says? Please use our list to assist with your own analysis.

    1) Matrix Service Co. (NASDAQ:MTRX)

    Sector Industrial Goods
    Industry Heavy Construction
    Market Cap $300.78M
    Beta 1.80

    MTRX stock chart

    Key Metrics

    Long Term Debt/Equity Ratio 0.01
    Debt/Equity Ratio 0.01
    Current Ratio 2.28
    Quick Ratio 2.25
    Short Interest 2.86%

    Matrix Service Company provides construction, and repair and maintenance services primarily to the energy and energy related industries in the United States and internationally. The company operates in two segments, Construction Services, and Repair and Maintenance Services. The Construction Services segment offers aboveground storage tanks for the bulk storage/terminal industry, capital construction for the downstream petroleum industry, and specialty construction, as well as electrical/instrumentation services, such as civil/structural, mechanical, piping, electrical and instrumentation, millwrighting, and fabrication for various industries.

    This segment focuses on renovations, retrofits, modifications, and expansions to existing facilities, as well as construction of new facilities. The Repair and Maintenance Services segment provides aboveground storage tank repair and maintenance services, including tank inspection, cleaning, and American Society of Mechanical Engineers code repairs; planned major and routine maintenance for the downstream petroleum industry; specialty repair and maintenance services; and electrical and instrumentation repair and maintenance. It serves integrated oil companies, independent petroleum refiners, power companies, engineering firms, general contractors, and petrochemical and industrial gas companies, as well as pipeline, terminal, and oil and gas marketing companies. The company was founded in 1989 and is headquartered in Tulsa, Oklahoma.

    2) Global Power Equipment Group Inc. (NASDAQ:GLPW)

    Sector Industrial Goods
    Industry Diversified Machinery
    Market Cap $331.10M
    Beta 1.40

    GLPW stock chart

    Key Metrics

    Long Term Debt/Equity Ratio 0.00
    Debt/Equity Ratio 0.00
    Current Ratio 3.98
    Quick Ratio 3.85
    Short Interest 7.69%

    Global Power Equipment Group Inc. and its subsidiaries designs, engineers, and manufactures gas turbine auxiliary equipment; and provides routine and specialty maintenance services to customers in the utility and industrial sectors. Its gas turbine auxiliary equipment include filter houses, inlet systems, exhaust systems, diverter dampers, selective catalytic emission reduction systems, packaged skids, and precision parts and specialty fabrications. These products are primarily used in the operation of gas turbine power plants, as well as for other industrial, energy, and power-related applications. The company's service offerings consist of nuclear power plant modification, maintenance, and construction; and fossil fuel and hydroelectric power plant modification and construction services.

    It also provides specialty services comprising cleaning, surface preparation, coatings application, quality control, and inspection testing services; industrial insulation services, primarily in process-piping installations; abatement services for the removal of asbestos and removal of heavy metal based coatings, such as lead paint; replacing, repairing, and upgrading industrial facility roofing systems; and integrated valve and actuator services that include inspection, preventative maintenance, and repair of various types of valves and actuators.

    It serves original equipment manufacturers; engineering, procurement, and construction contractors; operators of power generation facilities; and firms engaged in various process-related industries, as well as utility companies. The company operates primarily in the United States, Canada, and Mexico; and Europe, Asia, and the Middle East; and internationally. Global Power Equipment Group Inc. was founded in 1998 and is headquartered in Irving, Texas.

    3) Mueller Industries Inc. (NYSE:MLI)

    Sector Industrial Goods
    Industry Metal Fabrication
    Market Cap $1.66B
    Beta 0.93

    MLI stock chart

    Key Metrics

    Long Term Debt/Equity Ratio 0.01
    Debt/Equity Ratio 0.04
    Current Ratio 3.93
    Quick Ratio 2.97
    Short Interest 1.73%

    Mueller Industries, Inc. engages in the manufacture and sale of copper, brass, plastic, and aluminum products in the United States, Canada, Mexico, Great Britain, and China. It operates in two segments, Plumbing and Refrigeration, and Original Equipment Manufacturers (OEM). The Plumbing and Refrigeration segment offers copper tubes in straight lengths and coils for plumbing applications; copper and plastic fittings, line sets, and related components for use in water distribution systems, heating systems, air-conditioning, and refrigeration applications, as well as for drainage, waste, and vent systems.

    It also fabricates steel pipe nipples; and resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products to plumbing wholesalers and building materials retailers, as well as to distributors of manufactured housing and recreational vehicle industries. This segment markets its products directly, as well as through a network of agents. The OEM segment manufactures and sells brass, bronze, and copper alloy rods for applications that require a high degree of machinability, wear and corrosion resistance, and electrical conductivity; brass and aluminum forgings for use in various products, including automotive components, brass fittings, industrial machinery, valve bodies, gear blanks, and computer hardware; and cold-formed aluminum and copper impact extrusions for use in automotive, military ordnance, aerospace, and general manufacturing industries.

    It also manufactures and fabricates valves and custom OEM products for refrigeration and air-conditioning, gas appliance, and barbecue grill applications; and manufactures shaped and formed tube for baseboard heating, appliances, and medical instruments. This segment sells its products directly to OEMs, as well as to other manufacturers and distributors. The company was founded in 1900 and is headquartered in Memphis, Tennessee.

    *Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/04/2012.

    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.

    Stocks: GLPW, MLI, MTRX
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