5 Low-Debt Small Cap Stocks With Cash On Hand

by: ZetaKap

When considering small cap stocks, most investors agree that it is imperative to focus on companies that have set themselves up for long term sustainability. Companies with sustainable business models often have a high level of liquidity and carry a minimal amount of debt. Cash reserves signify that a business has fiscal prudence as well as confidence in its ability to carry on through market ups and downs. Equally important is for companies to not lean too heavily on borrowing as it nearly always interferes with growth. With this in mind, we developed a list of liquid small cap stocks with minimal debt. We think you find our list worthy of further review.

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 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 stocks. We then screened for businesses that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). Next, we then screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.

Do you think these small-cap stocks should be priced higher? Use our list along with your own analysis.

1) Cynosure, Inc. (NASDAQ:CYNO)

Sector Healthcare
Industry Medical Appliances & Equipment
Market Cap $346.42M
Beta 1.96

CYNO stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Current Ratio 3.58
Quick Ratio 2.67
Short Interest 4.30%

Cynosure, Inc. develops, manufactures, and markets aesthetic treatment systems to the dermatology, plastic surgery, and general medical markets. Its aesthetic treatment systems incorporate a range of laser and other light-based energy sources, including Alexandrite, pulse dye, Nd:Yag, and diode lasers, as well as intense pulsed light. The company sells its products through a direct sales force in North America, France, Spain, the United Kingdom, Germany, Korea, China, Japan, and Mexico, as well as through international distributors in 97 other countries. Cynosure, Inc. was founded in 1991 and is headquartered in Westford, Massachusetts.

2) Hollysys Automation Technologies, Ltd (NASDAQ:HOLI)

Sector Industrial Goods
Industry Industrial Electrical Equipment
Market Cap $525.84M
Beta 1.94

HOLI stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.07
Current Ratio 2.32
Quick Ratio 2.18
Short Interest 8.98%

Hollysys Automation Technologies Ltd. provides automation and control technologies and applications to customers in the industrial, railway, subway, and nuclear industries in China and south-east Asia. It offers distributed control systems, which are networks of controllers, sensors, actuators and other devices that can be programmed to control outputs based on input conditions and/or algorithms; programmable logic controllers that are small computer devices installed on machines or equipment; and train control centers, which monitor route condition, track status, train schedules, distance between trains, and the working status of other essential function devices. The company was formerly known as HLS Systems International Ltd. and changed its name to Hollysys Automation Technologies Ltd. in July 2009. The company was founded in 1993 and is headquartered in Beijing, China.

3) GenMark Diagnostics, Inc. (NASDAQ:GNMK)

Sector Healthcare
Industry Medical Appliances & Equipment
Market Cap $306.03M
Beta -

GNMK stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.00
Current Ratio 10.04
Quick Ratio 9.76
Short Interest 1.17%

GenMark Diagnostics, Inc., a molecular diagnostics company, focuses on the development and commercialization of molecular diagnostic testing systems based on its proprietary eSensor detection technology in the United States. The company develops XT-8 system, an automated molecular diagnostic system consisting of a compact bench-top workstation and self-contained disposable test cartridges enabling reference laboratories and hospitals to perform a range of molecular diagnostic tests. Genmark Diagnostics, Inc. is headquartered in Carlsbad, California.

4) Cubic Corporation (NYSE:CUB)

Sector Technology
Industry Scientific & Technical Instruments
Market Cap $1.34B
Beta 0.88

CUB stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.01
Current Ratio 2.22
Quick Ratio 2.06
Short Interest 2.27%

Cubic Corporation engages in the design, development, manufacture, integration, installation, operation, maintenance, and support of defense electronics and transportation fare collection systems worldwide. It operates through three segments: Cubic Transportation Systems, Cubic Defense Systems, and Mission Support Services. The company was founded in 1949 and is headquartered in San Diego, California.

5) Acorda Therapeutics, Inc. (NASDAQ:ACOR)

Sector Healthcare
Industry Biotechnology
Market Cap $1.03B
Beta 0.51

ACOR stock chart

Key Metrics

Long Term Debt/Equity Ratio 0.02
Current Ratio 3.70
Quick Ratio 3.37
Short Interest 7.27%

Acorda Therapeutics, Inc., a commercial-stage biopharmaceutical company, engages in the identification, development, and commercialization of novel therapies for multiple sclerosis, spinal cord injury, and other central nervous system disorders primarily in the United States. Acorda Therapeutics, Inc. was incorporated in 1995 and is headquartered in Ardsley, New York.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/26/2012.

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.