In my weekly premium newsletter -- Undiscovered Micro-Cap Gems -- my goal is to introduce readers to a variety of promising micro-cap investing ideas that they may wish to consider for their portfolios. In doing so, I generally look for small, neglected companies that have been overlooked by conventional Wall Street sources. I also look for undervalued firms that are trading at a steep discount to their intrinsic value. Many of these individual investment ideas have the potential to deliver triple-digit percentage gains in the years ahead.

Below you'll find an in-depth look at one such investing idea that I introduced my readers to in a recent issue. To gain access to dozens of similar investing ideas each and every week, you'll need to subscribe to my Undiscovered Micro-Cap Gems service. In the meantime, I sincerely hope you enjoy today's sneak peak at one of my most recent micro-cap investing ideas...

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Flamemaster (FAME.PK, $5.10)
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Flamemaster develops an array of heat-resistant products that are used in the aerospace and defense sectors. The company's flame retardant coatings are designed to stop the spread of fires through electrical cables. Its specialized heat-resistant coatings can withstand extreme temperatures and are used to protect the surfaces of naval ships from the effects of missile launches. Flamemaster also sells sealants for airplane fuel tanks and pressurized compartments.

This is another stock that has been a victim of costly Sarbanes Oxley regulations. In addition to the standard risks associated with the fact that the company trades on the pink sheets, Flamemaster also has issues concerning the concentration of its customer base. Nevertheless, there is value hidden below the surface here.

For starters, the stock is controlled by a diverse group of insiders who should have incentive to see the shares appreciate. Although the firm's recent financial results have been unimpressive, company revenues have climbed +4.1% in the year-to-date period to reach $3.7 million. One-time expenses stemming from a failed merger have contributed to a modest decrease in net income, but the firm's bottom line remains solidly positive. It is also worth pointing out that the company has reliably distributed 63 consecutive quarterly dividend payments, which reflects an ability to generate consistent cash flows in any economic cycle.

Currently, the shares are trading at a reasonable Price/Book ratio of 1.5, well below the industry norm of 3.7. FAME is also trading at attractive Enterprise Value/Sales and Enterprise Value/Gross Profit multiples of 0.8 and 1.7, respectively. Furthermore, the firm's balance sheet is in excellent shape. Flamemaster has nearly $1 million in cash on the books with no debt, and maintains a healthy current ratio in excess of 14.

Barring the unexpected loss of a major customer or a sudden deterioration of operating conditions, Flamemaster's underlying value should eventually be reflected in its share price. In the meantime, the attractive 2.6% dividend yield provides ample incentive to wait for a turnaround. I wouldn't recommend jumping into this relatively illiquid stock without performing additional due diligence, but patient investors should ultimately find FAME rewarding.

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Important Note: The above article was merely a small excerpt from a recent issue we sent to subscribers of our premium value investing service -- Margin-of-Safety Investing. In each issue of that newsletter, editors Nathan Slaughter and Paul Tracy deliver an in-depth look at a variety of other deeply discounted stocks that should provide investors with a solid margin of safety at current prices. To receive your copy of our most recent issue of Margin-of-Safety Investing, as well as other guidance similar to this twice per month, you'll need to subscribe to this publication. To learn more, please visit:
https://www.streetauthority.com/subscribe-msi.asp

Thanks for reading!

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