Miller Industries (MLR)

[DAVE_007]

from Motley Fool article..Bargain Bin..Sept. 6, 2007

Miller's time?
For value investors, nothing's sweeter than when the shares of an industry-leading business suffer a nasty, seemingly unwarranted haircut. While a plummeting stock in itself doesn't automatically warrant a buy, it's often a pretty profitable place to start looking. On Aug. 7, Miller Industries, a small-cap producer of towing equipment, piqued the interest of many investors in our community when its stock spiraled down by a heartbreaking 25%.

The shares have yet to recover -- in fact, it's down another 5% since -- but according to several CAPS Fools, it's simply a matter of time before Miller bounces back. Let's take a closer look, shall we?

Despite a market cap of $205 million and virtually nonexistent analyst coverage, Miller happens to be the world's largest producer of vehicle towing and recovery equipment. Naturally, this doesn't exactly sound like the sexiest business to be in, but a quick glance at Miller's financials shows that it really isn't a bad business to be in, either. In each of the past three years, Miller has generated returns on capital of roughly 20%, and it has grown cash flow from operations at a compounded rate of 49% over that period.

Of course, it's the future that counts with investing, which is exactly why Mr. Market has recently soured on the stock. Though Miller reported second-quarter revenue and pre-tax income growth of 18.4% and 20.4%, respectively, Co-CEO Jeffrey Badgley depressed investors by forecasting lower sales for the rest of 2007. Badgley cited a lack of additional follow-on orders and general concerns about the economy as the primary reasons for his bearishness.

Sure, the short-term prospects for Miller aren't exceptionally bright, but for investors willing to take a longer-term horizon, there are a few good reasons why Miller should at least make it to the watch list.

For one thing, Chairman and Co-CEO William G. Miller continues to own roughly 12% of the company -- something we Fools always like to see. More importantly, though, is that MLR has a rock-solid balance sheet with a measly debt-to-equity ratio of 5.1%.

Betting on a turnaround is always a tricky proposition, but at the very least, you'd like to see a history of strong financial performance, heavy insider ownership, and a solid financial position to help survive any extended slowdown -- all of which are characteristics that Miller Industries exhibits.