One of the great little stocks in our Small & Micro Cap Screener, which you can register for here, is Chicago Rivet & Machine Co. (NYSEMKT:CVR).

CVR operates in two segments of the fastener industry: fasteners and assembly equipment. The fastener segment consists of the manufacture and sale of rivets, cold-formed fasteners and parts and screw machine products.

The assembly equipment segment consists primarily of the manufacture of automatic rivet setting machines, automatic assembly equipment and parts and tools for those machines.

As you can see from the chart below, CVR has had a pretty good run over the past 12 months with its share price up 12.6%, but there’s still room for a lot more growth.

Growing Revenues & Earnings

For the first half of 2016, net sales totaled $19.4 Million compared to $18.5 Million in the first half of 2015, an increase of $927,160, or 5.0%.

Net income for the first half of 2016 was $1.4 Million or $1.49 per share, compared to $1 Million, or $1.07 per share, reported in the first half of 2015, a significant increase of 39.5%.

	Six Months Ended June 30,
	2016		2015
Net sales	$	19,417,125	$	18,489,965
Cost of goods sold		14,379,598		14,148,590
Gross profit		5,037,527		4,341,375
Selling and administrative expenses		2,908,621		2,834,679
Operating profit		2,128,906		1,506,696
Other income		29,210		20,738
Income before income taxes		2,158,116		1,527,434
Provision for income taxes		716,000		494,000
Net income	$	1,442,116	$	1,033,434

Why the increase in net income?

The increase in net income during the second quarter and year to date was primarily due to higher sales in both operating segments, a more profitable sales mix and favorable raw material prices compared to the previous year.

Most notable are the company’s increases in both gross profits and operating profits up 16% and 41% respectively, and the company reported its highest operating profit for the past four quarters of $1.16 Million. Growth in operating profits is something we love to focus on here at The Acquirer’s Multiple.

The Domestic Automotive Industry

In terms of the current market environment, demand for CVR’s products is directly related to conditions in the domestic automotive industry, which is highly cyclical and affected by a variety of factors, including regulatory requirements, international trade policies, and consumer spending and preferences.

The domestic automotive industry is characterized by fierce competition, and has undergone major restructuring in recent years in response to overcapacity, narrowing profit margins, significant pension and health care liabilities and excess debt.

Conditions in the domestic automotive industry declined significantly during 2008, and worsened further in 2009 as the global recession took hold, resulting in a substantial decline in vehicle sales. Overall, automotive production in the United States declined approximately 50 percent between 2000 and 2009, before rebounding in 2010.

Automotive production and sales have since increased in 2010 through 2015. This has been good news for CVR.

CVR does have reliance on sales to two major customers

It’s important not to overlook the fact that CVR does have a heavy reliance on two customers as stated in company’s latest 10-K dated December 31, 2015. Sales to two customers constitute approximately 33% of CVR’s consolidated revenues in 2015 and 2014.

Sales to TI Group Automotive Systems, LLC accounted for approximately 21% and 20% of the Company’s consolidated revenues in 2015 and 2014, respectively. Sales to Fisher & Company accounted for approximately 12% and 13% of the Company’s consolidated revenues in 2015 and 2014, respectively.

Real Value

But, with that said, a closer look at the company’s balance sheet (below) shows the real value of CVR.

June 30, 2016
(Amounts as Ststed)	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	907,384
Certificates of deposit		6,565,000
Accounts receivable—Less allowances of $150,000		6,278,622
Inventories, net		4,991,208
Prepaid income taxes		—
Other current assets		319,604
Total current assets		19,061,818
Property, Plant and Equipment:
Land and improvements		1,424,689
Buildings and improvements		7,478,507
Production equipment and other		33,613,257
		42,516,453
Less accumulated depreciation		30,488,131
Net property, plant and equipment		12,028,322
Total Assets	$	31,090,140
Liabilities
Current Liabilities:
Accounts payable	$	1,240,204
Accrued wages and salaries		892,712
Other accrued expenses		470,217
Unearned revenue and customer deposits		263,732
Total current liabilities		2,866,865
Deferred income taxes		879,084
Total liabilities		3,745,949

This is a company that has over $7.4 Million in cash and short term investments while its total liabilities add up to just $3.7 Million. That means the company has $3.7 Million left over after it pays all of its liabilities and it has zero debt.

What’s also noticeable is that CVR has tangible book value of $27.3 Million when you subtract all of its liabilities ($3.7 Million) from its total assets ($31 Million). The company has no preferred stock or intangibles.

This by itself may not mean a lot until you look at the company’s market cap which according to Google Finance is $27.56 Million. So the company is essentially trading around tangible book value.

Furthermore, when you subtract the companies cash and short term investments of $7.4 Million from its current market cap of $27.56 Million you get an Enterprise Value of $20.86 Million or just 6.7 times operating earnings.

CVR is a great little small cap with growing sales and profits, a strong balance sheet and loads of free cashflow, zero debt, and a cheap valuation.

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