Portec Rail Products, Inc. (PRPX)

Business: Portec Rail Products, Inc.
Nasdaq: PRPX

Portec Rail Products, founded in 1906, manufactures, supplies, and distributes rail products including rail joints, data management systems, rail anchors, and freight car securement systems in the U.S., Canada, and the United Kingdom.

Reasons to be interested:

1. Record gas and oil prices continue to make railroads the next best option for transporting goods when put against the trucking industry - which suck up gas and aren't at all economical when compared to freight transportation. Portec Rail Products is in a great position to benefit from the increasing trend to railroads as long as management makes wise decisions, which shouldn't be too much to expect given that most of the company's executives and directors have been with the company for at least ten years and have quite a bit of experience in the industry. Management owns 36% of the company's outstanding shares.

2. Since 2003 Portec's cash flow production has steadily increased, standing at $8.93 million in 2007. The company rarely brings on debt and for the most part the company's cash flow production has fueled growth. In the most recent quarter earnings grew at a very respectable 33% and margins increased as well. An interesting side note is that stock options do not dilute the company's shares as we are used to with most companies, for the past three years the share count has stood at 9,600,000 and hasn't budged.

3. Ever since going public in January 2004 the company has paid a consistent dividend every quarter, not missing a single quarter or ever lowering the dividend. Currently the dividend stands at 2%.

Main risk:

1. Portec Rail Product's balance sheet isn't especially strong with $4.27 million in cash and $16.33 million in debt. This is certainly a manageable amount, but if the company and/or industry start to face greater challenges, Portec would probably be in a difficult position to continue expansion.