3 Cash-Loaded Small-Cap Stocks Holding Down The Debt

Includes: GMED, ICUI, TRC
by: ZetaKap

We all know why cash reserves matter when it comes to our personal finances. There are always unexpected events that require dipping into savings. When we don't have that extra source of funds, there is little choice but to either utilize credit or make sacrifices. The same principle is true in businesses and especially pertinent to companies at the small-cap level. Due to their smaller size, these companies have more to prove and having a high level of liquidity and minimal debt provides reassurance to investors that the management is on top of the fiscal management. For today we have a short list of small caps with high levels of liquidity and little debt. We think you will find our list rather interesting.

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).

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.

We first looked for small cap stocks. We then looked for businesses that have a substantial amount of cash on hand (Current Ratio>2) (Quick Ratio>2). We then looked for businesses 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 did not screen out any sectors.

Do you think these small-cap stocks have a strong outlook? Use our list along with your own analysis.

1) ICU Medical, Inc. (NASDAQ:ICUI)

Sector Healthcare
Industry Medical Instruments & Supplies
Market Cap $821.67M
Beta 0.46

ICUI stock chart

Key Metrics

Current Ratio 9.84
Quick Ratio 8.61
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 16.77%

ICU Medical, Inc. engages in the development, manufacture and sale of medical technologies used in infusion therapy, oncology and critical care applications. The company's product line includes custom infusion systems, closed delivery systems for hazardous drugs, needleless infusion connectors, catheters, and cardiac monitoring systems. Its products are designed to enhance patient outcomes by preventing bloodstream infections, protecting healthcare workers and patients from exposure to infectious diseases or hazardous drugs, and monitoring the cardiac output of critical care patients.

The company offers intravenous therapy lines, CLAVE product, a needleless I.V. connection device, which would be used with conventional peripheral or central vascular access systems for venous and arterial applications and custom infusion sets. It also provides critical care products that monitor vital signs and specific physiological functions of key organ systems. In addition, the company provides TEGO for use in dialysis; a line of oncology products, including Spiros male luer connector device; the Genie vial access device; and custom I.V. sets and ancillary products for chemotherapy. ICU Medical, Inc. sells its products to medical product manufacturers and independent medical supply distributors, as well as directly to the end customers worldwide. The company was founded in 1984 and its headquarters is in San Clemente, California.

2) Tejon Ranch Co. (NYSE:TRC)

Sector Financial
Industry Property Management
Market Cap $588.05M
Beta 0.91

TRC stock chart

Key Metrics

Current Ratio 13.93
Quick Ratio 12.72
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 2.48%

Tejon Ranch Co., together with its subsidiaries, engages in the real estate development and agribusiness activities in the United States. The company operates in three segments: Commercial/Industrial Real Estate Development and Services, Resort/Residential Real Estate Development, and Farming. The Commercial/Industrial Real Estate Development and Services segment is involved in entitling, planning, and permitting land for development; the construction of infrastructure, pre-leased buildings, and buildings to be leased or sold; and the sale of land to third parties.

This segment leases land to auto service stations with convenience stores, fast-food operations, full-service restaurants, motel, antique shop, and the United States Postal Service facility; microwave repeater locations, radio and cellular transmitter sites, and fiber optic cable routes; 32 acres of land for an electric power plant; office building; and portions of land to oil companies for the exploration and production of oil and gas, as well as for grazing and communications. It also offers landscape maintenance and game management services. The Resort/Residential Real Estate Development segment engages in the land entitlement, land planning and pre-construction engineering, and land stewardship activities. The Farming segment farms various permanent crops, including wine grapes in 1,640 acres; almonds in 1,520 acres; and pistachios in 1,055 acres. This segment also manages farming of alfalfa and forage mix on 775 acres in the Antelope Valley; and leases 750 acres of land for growing vegetables. The company was founded in 1936 and is based in Lebec, California.

3) Globus Medical, Inc. (NYSE:GMED)

Sector Healthcare
Industry Medical Appliances & Equipment
Market Cap $1.47B
Beta -

GMED stock chart

Key Metrics

Current Ratio 10.12
Quick Ratio 8.29
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 0.20%

Globus Medical, Inc., a medical device company, focuses on the design, development, and commercialization of products that promote healing in patients with spine disorders. It offers approximately 100 innovative fusion and disruptive technology products that address an array of spinal pathologies, anatomies, and surgical approaches.

The company's products under clinical development include SECURE-C Cervical Artificial Disc, an artificial disc designed to alleviate pain and preserve motion in patients with symptomatic cervical disc disease; ACADIA Facet Replacement System, which allows for an anatomic reconstruction of the facet joint after the degenerated facet is decompressed and removed; and TRIUMPH Lumbar Disc that is used in the treatment of lumbar degenerative disc disease. Globus Medical, Inc. sells its implants and related disposables primarily to hospitals. The company markets and sells its products through sales representatives and independent distributors in the United States and 17 countries internationally. Globus Medical, Inc. was founded in 2003 and is based in Audubon, Pennsylvania.

Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.

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.