In the annual Barron's Roundtable (sub. req.) of investment pros, Delphi Management's Scott Black picked a microcap retailer as a winner for 2006:
My next stock, CCA Industries (NYSEMKT:CAW), is based in East Rutherford, N.J. The stock is 8.95, and it's a $66 million micro-cap. The company had a straight-up record until this year, earning over 20% on book, with absolutely no debt. They took on the Denise Austin line of skincare and cosmetics but it didn't do well. CCA sells diet aids, teeth-whitening products, skin-care products and depilatories. The biggest customer is Wal-Mart, at 32.7% of sales. The balance sheet is clean. They have $5.6 million in cash and equivalents and $8.3 million in marketable securities. That's $1.90 a share. There is no debt.
This fiscal year CCA will make $6.2 million, or 84 cents a share. The stock sells for roughly 11 times earnings. Return on capital will be 20.5%, and free cash flow will be $7 million to $8 million. The stock is down from almost 14 and is due for a rebound.
CAW 1-yr chart: