5 Cash-Loaded Small Cap Stocks With Low To No Debt

by: ZetaKap

Companies with cash reserves are a bit like cars with full tanks of gas that also have ready access to a healthy fuel supply. In the current economy, the mobility that stems from a cash reserve offers a desirable advantage over the competition. Those funds can be accessed to fuel strategic growth-enhancing tactics like acquisitions or adding to a product line. Keeping this in mind, we developed a list of small cap stocks that have a high level of liquidity and healthy debt ratios. Both of those traits add up to companies with solid foundations from which to expand. We think you will find out list worthy of further research.

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 create substantial trouble.

We first looked for small cap stocks. We then screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We then screened for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). We then looked for businesses that operate with little to no debt (D/E Ratio<.1). We did not screen out any sectors.

Do you think these small cap stocks deserve to grow higher? Use our screened list as a starting point for your own analysis.

1) AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG)

Sector Healthcare
Industry Diagnostic Substances
Market Cap $392.72M
Beta 0.66

AMAG stock chart

Key Metrics

Current Ratio 7.35
Quick Ratio 6.95
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 3.88%

AMAG Pharmaceuticals, Inc., a biopharmaceutical company, engages the development and commercialization of a therapeutic iron compound to treat iron deficiency anemia. AMAG Pharmaceuticals, Inc. was founded in 1981 and is based in Lexington, Massachusetts.

2) SurModics Inc. (NASDAQ:SRDX)

Sector Healthcare
Industry Diagnostic Substances
Market Cap $375.18M
Beta 1.15

SRDX stock chart

Key Metrics

Current Ratio 16.60
Quick Ratio 16.00
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 2.20%

SurModics, Inc. provides drug delivery and surface modification technologies to the healthcare industry. The company offers surface modification coating technologies to enhance access, deliverability, and predictable deployment of medical devices, as well as drug delivery coating technologies to provide site-specific drug delivery from the surface of a medical device for the coronary, peripheral, neuro-vascular, and urology markets. The company was founded in 1979 and is headquartered in Eden Prairie, Minnesota.

3) Aurizon Mines Ltd. (AZK)

Sector Basic Materials
Industry Gold
Market Cap $831.91M
Beta 0.55

AZK stock chart

Key Metrics

Current Ratio 7.00
Quick Ratio 6.56
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 0.51%

Aurizon Mines Ltd. engages in the acquisition, exploration, development, and production of gold properties in North America. The company's principal properties include the Casa Berardi gold mine and the Joanna gold project, both located in the Abitibi region of northwestern Quebec. Aurizon Mines Ltd. was founded in 1988 and is headquartered in Vancouver, Canada.

4) Balchem Corp. (NASDAQ:BCPC)

Sector Basic Materials
Industry Chemicals - Major Diversified
Market Cap $1.11B
Beta 0.73

BCPC stock chart

Key Metrics

Current Ratio 6.62
Quick Ratio 5.95
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 2.89%

Balchem Corporation develops, manufactures, and sells specialty performance ingredients and products for the food, nutritional, feed, pharmaceutical, and medical sterilization industries in the United States and internationally. It operates in three segments: Specialty Products; Food, Pharma & Nutrition; and Animal Nutrition & Health. Balchem Corporation was founded in 1967 and is headquartered in New Hampton, New York.

5) Sun Hydraulics Corp. (NASDAQ:SNHY)

Sector Industrial Goods
Industry Industrial Equipment & Components
Market Cap $712.13M
Beta 1.99

SNHY stock chart

Key Metrics

Current Ratio 9.10
Quick Ratio 8.08
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Short Interest 6.51%

Sun Hydraulics Corporation, together with its subsidiaries, designs, manufactures, and sells screw-in hydraulic cartridge valves and manifolds used in hydraulic systems to industrial and mobile customers worldwide. Sun Hydraulics Corporation was founded in 1970 and is based in Sarasota, Florida.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/03/2012.

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.