Investors might be more tempted to think of The Roadrunner and Wile E. Coyote than rulers, scissors, and first aid kits for schools and offices when thinking of Acme United (AMEX:ACU), and for good reason: Lately, it has been acting more like its cartoon counterpart than like a staid office supply company.

The company has been pouring on the speed as sales rev up to ever-higher levels. For the first quarter of 2005, Acme reported revenues grew 23% over last year, which is on top of the 19% growth it reported in the first quarter of 2004. Though the fourth quarter would naturally be one of its best, since it includes the important back-to-school season, sales for the school and office supplier have been ramping up altogether for the past seven quarters.

2005 2004 2003
Q1 23.2% 19.4% 5.9%
Q2 * 21.8 7.4
Q3 * 22.1 20.3
Q4 * 34.6 17.4
23.2% 24.4% 12.6%

While no analysts cover Acme, Tom Gardner picked it as one of his Watch List stocks for the Motley Fool Hidden Gems newsletter. He liked its stable of institutional owners, its solid financials, its growth in owner's earnings, and the fact that it pays a dividend. It has appreciated nearly 50% in value since it was first mentioned.

The financials on the company continue to improve. Not only are sales increasing but also gross margins have improved to 46% from 43%, long-term debt has been almost completely eliminated, and cash in the bank has grown more than 40% from last year. Moreover, the company has been buying back shares and authorized a new buyback program of an additional 150,000 shares. The one concern Tom had was the concentration of sales among three customers.

Staples (NASDAQ:SPLS), OfficeMax (NYSE:OMX), and United Stationers (NASDAQ:USTR) account for 43% of sales. While we'll have to wait for the actual financial statements to come out to see what the percentages are now, that figure was down last quarter from 46% the previous year. It's still a sizable amount, but it was moving in the right direction. And the company was able to grow even as some of its customers faced some difficult times.

Also moving in the right direction, like Wile E. Coyote riding an Acme Jet-Propelled Unicycle, were European sales that had previously been a drag on performance. In 2003, Acme lost more than $1 million in sales, which improved to a loss of $470,000 in 2004. For the first quarter of 2005, sales grew 16% over last year.

Acme has tough competition in the form of several foreign and privately held companies, some with better name recognition, including Fiskars, Esselte (the makers of Pendaflex and DYMO products), and Alco Industries, from which it bought Clauss Cutlery last year. However, with its three primary customers all expected to enjoy 15% growth over the next five years, Acme is positioned to remain a leader without having to resort to dropping anvils on the competition's head. On the Hidden Gemsdiscussion boards, I have valued the company at around $27 a share over the next three years, which would represent a near double for investors at its current price. Wile E. Coyote's got nothing on this Roadrunner. Beep! Beep!

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Fool contributor Rich Duprey owns shares of Acme United but does not own any of the other stocks mentioned in the article. The Motley Fool has a disclosure policy.