Cascade (NYSE:CAE) is a small-cap player in a pretty boring industry -- manufacturing load-handling products for forklifts and other industrial trucks. You may not care how the company can handle lifting items, either with or without pallets. But Foolish investors might be more interested to learn that the stock has been close to a four-bagger in the past five years.

Cascade reported first-quarter earnings today, trading up nearly 7% to a current $38.29 after results topped analyst expectations. Sales seem to be slowing after a couple of stellar years, increasing only 3%, while net income dropped 10%. That doesn't sound too great overall, but the results surpassed consensus earnings projections. In concert with increased 2006 earnings guidance from management, the results earned Cascade a broker upgrade.

Only about four analysts currently cover the stock, but the consensus for next year's earnings averages $3.21 per share, for a forward P/E just above 11. However, a low P/E can be deceiving for cyclical stocks -- during the peak of an expansionary period in the economy, earnings can be very high, pushing the denominator in a P/E up and the subsequent multiple down. It's a bit counterintuitive, but with a cyclical, it's best to hold off buying while the P/E is low, and start to back up the truck when the P/E is high. Of course, it's best to be able to time cycle turns, but no savvy investor has yet created a decent model for predicting the future.

To further illustrate Cascade's cyclicality, earnings growth has averaged close to 30% annually over the past five years, in concert with the booming economy. Revenue has grown nearly 8% annually over the same time frame. But earnings and sales took a tumble during the last downturn, averaging a double-digit decrease from 2000 through 2002. That was the time to buy.

It helps to view cyclical companies like Cascade, Caterpillar (NYSE:CAT), Deere (NYSE:DE), or Joy Global (NASDAQ:JOYG) over a longer time frame, smoothing out any cyclical gyrations in the economy. The longer-term picture looks good for Cascade; annually, sales have grown almost 7%, and earnings 14%, over the past 10 years. It also looks like management has been working to pay down long-term debt and lower interest expense, which will help the company better withstand any downturns in its markets.

Overall, Cascade appears to navigate choppy economic cycles and lift-truck industry markets quite well, with consistent double-digit returns on equity. Again, this may not sound logical to most investors, but if you can stomach the ups and downs created by gyrations in industrial markets, cyclical stocks can be long-term holds.

Besides the need to track industrial activity, Cascade investors should also monitor its outstanding environmental cleanup issues. The company is working through these concerns with states where its plants are or were located. In aggregate, they don't seem too worrisome, since the company estimates current liabilities at close to $9 million. The most expensive issue involves groundwater-contamination litigation among the City of Portland, Cascade, and Boeing (NYSE:BA).

Don't be fooled by the current low P/E. It's probably best to put Cascade on your watch list and see whether economic growth slows from current high levels. But when the next downturn comes, make sure your wallet's ready.

A small-cap player with strong business fundamentals, in a boring industry, underfollowed by Wall Street? Sounds familiar. Tom Gardner specializes in finding companies just like this in the Motley Fool Hidden Gems newsletter. See all of Tom and his team's current picks with a free 30-day guest pass .

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss the company further.