With markets acting turbulent like always, there is certainly value in looking for cheap stocks that have that “margin of safety” as Ben Graham used to call it. Stock picking is an art and never will be an exact science, so low valuations will always provide a buffer that will allow you to sleep better at night. For today, I found a small cap called Miller Industries (MLR).
The company engages in the manufacture and sale of vehicle towing and recovery equipment in North America and internationally. It offers wreckers, including conventional tow trucks to large recovery vehicles used to recover and tow disabled vehicles and other equipment; car carriers, specialized flat-bed vehicles with hydraulic tilt mechanisms used to transport new or disabled vehicles and other equipment.
Gargantuan Earnings
Miller reported a stellar first-quarter report in which sales grew 50.7% and net income increased over 270% over last year. Earnings per share of 61 cents beat the consensus estimate by 110.3%. This was the fourth straight quarter of strong earnings beats. This is exactly what you want to see in a prospective stock.
Jeffrey I. Badgley, CEO of the Company, stated, “Results in our 2011 first quarter reflected excellent execution as we achieved strong year-over-year growth in revenue primarily driven by the sharp increase in government-related revenues, as well as some improvement in both our domestic and European sales.”
Digging deeper into the financials provides more comfort for shareholders. It has an ROE of 11.5% and is trading at a scant 0.63x sales and 1.36x book value. It has barely any debt on the balance sheet and a solid current ratio of 2.69x, which means it can easily handle its short-term liabilities.
Keep in mind that it is a micro cap at $215 million and only trades about 50,000 shares per day. This is below the liquidity I usually like to see, but as long as you are not trading it frequently, it shouldn’t matter too much. Another kicker is the company’s 2.6% dividend yield. Not many microcaps pay a dividend like that. This should could hit $23-$25 over the next 12-18 months.
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