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Should You Be Enticed By This Small Textile Company?

|Includes: RCKY, Sears Holdings Corporation (SHLD), T

As January moves forward, we have gotten some rather off-putting news this past week; specifically the major fall in sales at Sears Holdings Corporation (NYSE: SHLD) and Kmart corporation, as well as a very disappointing jobs report. Shares of Sears closed down almost 14 percent on the day that it reported a major drop in holiday sales, along with Target Corp. (NYSE: TGT) who came out and said that their credit card hacking scandal was worse than previously reported. On top of all of that, after several months of 200,000 plus new jobs being added to the economy, the Department of Labor says only 74,000 new jobs were added during December. However, the overall market is not down by much so far this year and looks stable enough to continue its bull run (should earnings season be overall positive).

One stock to place on your watch list is Rocky Brands, Inc. (NASDAQ: RCKY). Rocky Brands makes durable work and hiking boots for hiking enthusiasts, construction workers, hospital workers, law enforcement and the U.S. military. The shoe company is more than just shoes as they provide high quality durable working boots for a variety of industries and consumers alike.

Turning to the fundamentals, Rocky Brands has a market cap of $114.84 million and currently has a "light buy" rating from analysts. Price to earnings is at 14.15 and forward price to earnings is at 11.94. Price earnings growth is at 1.41, while the stock looks undervalued when looking at its price to sales of .48 and price to book of .88. Price to cash needs some work, at almost 25, and the company has total debt to equity of .33. Luckily, this debt is classified as long-term and with their cash per share of $.61, the footwear company actually has a stable current ratio of 7.4. Additionally, Rocky Brands pays an annual dividend of 2.62 percent.

Earnings are expected to climb 6.3 percent this year, 16.89 percent next year, and 10 percent over the next five years. Management efficiency ratios are nothing to get excited about with return on assets of 4.4 percent, return on equity of 6.4 percent, and return on investment of 6.3 percent. Margins also could use some work with a gross margin of 34.2 percent, operating margin of 5.3 percent, and profit margin of 3.4 percent.

Overall, I think this stock is a good candidate to place on your watch list. I like the product and the array of different industries that it serves. The stock is enticing when you see that it is trading below book value and sales, as well as the 2.62 percent dividend, but margins and management efficiency ratios need work. Additionally, the company's cash reserves are on the lower end. I would like to know how they plan on upping cash and paying down debt, without cutting dividends.