Taking a Peek at BOO

Obscure little companies whose products are in constant demand can be great investments, particularly if they have stellar revenues, consistent earnings growth, and management ownership, and especially if they pay a dividend. I recently discovered these qualities in a little $100 million market-cap company called Collegiate Pacific (AMEX: BOO  ) . So let's take a closer look.

CP is the nation's fastest-growing maker and supplier of uniforms and sporting equipment. Sure, there are lots of places to buy sporting goods, including Wal-Mart (NYSE: WMT  ) , Sports Authority (NYSE: TSA  ) , and smaller local stores. However, CP occupies a unique niche by marketing sporting equipment and team uniforms directly to their customers via catalogs, the Internet, telesales, and road sales. By bypassing the middleman, this model can pass cost savings of up to 40% directly on to customers, including schools, churches, parks, colleges, and government agencies. With schools and other institutions continuing to slim down their budgets, these cost savings could bring in more business for CP.

With no large competitors and more than 250,000 institutions spending an estimated $6 billion annually on the products CP sells, the market potential is huge. Meanwhile, CP has increased its presence on the ground with 175 road-sales specialists spread across 22 states. If this trend continues and CP can advance its personal presence in additional states, the top line could prosper.

CP has already delivered remarkable growth over the past five years, with both the top and bottom lines already increasing considerably. For the fiscal year ending in June 2005, sales increased 168.8%, from $39.6 to $106.3 million -- five times higher than fiscal 2003 revenues.

Looking forward to the fiscal year beginning this July 1, we see the company expecting to earn between $0.62 and $0.78 per share, with total revenues coming in at around $250 million. With CP trading at $10 and some change per share, its forward P/E of around 14 appears lower than that of many of its competitors and may indicate a value opportunity.

I like it that CP's management owns about 20% of the stock. I also like the small but respectable dividend yield of 1%.

Small caps aren't for everyone, since they can be extremely volatile and more of them fail than fly. However, investing in small caps with outstanding attributes, like CP, can be quite rewarding.

To read more small cap madness:

Fool contributor M.D. Mitchell owns shares of Collegiate Pacific, but that doesn't mean you should, too. Please do your own research, and then do some more. And right before you're ready to buy, stop, go back and do even more. The Motley Fool is investors writing for investors.

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