After what's been an incredible three-month rally, I'm beginning to think about moving towards a more defensive posture. This isn't a market-timing call, just my own thought process and gut instincts on where the best value might currently exist. Without naming names, a lot of my growth-oriented stocks have moved from "very undervalued" to only "slightly undervalued." As a result, I'm beginning to look for some cheaper deep-value names to eventually replace my growth-at-a-reasonable-price stocks.

The type of deep value I'm specifically searching for -- and this will come as no surprise to regular readers -- are companies with defensive businesses, excess cash on the balance sheet, and a valuation below 10 times free cash flow. With these criteria in mind, here are three promising companies I've recently begun to evaluate:

Analogic Corp. (NASDAQ:ALOG)
Analogic is a behind-the-scenes technology specialist in the fields of healthcare and security -- two areas I believe are positioned for better-than-average growth over the next 10 years. Last year, 80% of revenue came from electronic systems for medical imaging equipment, while 11% came from advanced explosive detection systems.

With $489 million in annual sales, the Massachusetts company's state-of-the-art products are incorporated into larger medical, industrial, and scientific systems made by manufacturing giants including Philips (NYSE:PHG), General Electric (NYSE:GE), L-3 Communications (NYSE:LLL), and Toshiba (OTC: TOSBF.PK). Combined, these four companies made up 43% of Analogic's fiscal 2002 revenue.

Since 1995, Analogic's sales growth has averaged a tepid 6% annually -- until this past year, when sales caught fire. For the nine months through April, sales are up 79% thanks to surging demand for the company's EXplosive Assessment Computed Tomography (EXACT) systems. According to Analogic's 10-K, EXACT is the world's only security detection system capable of generating full three-dimensional images of every object contained inside a piece of luggage. You can imagine the interest our government has in seeing this technology rapidly deployed in major U.S. airports.

As for valuation, at $51.34, Analogic's market cap is $687 million. Backing out the company's $182 million cash hoard, the enterprise value (EV) is $505 million. Free cash flow (FCF) over the past year is about $53 million, not including interest income. All told, that's an EV-to-FCF ratio of 9.5. The stock also yields 0.6%.

Hawkins, Inc. (NASDAQ:HWKN)
Since 1955, this Minnesota company has been in the business of formulating, blending, and distributing bulk and specialty chemicals. Notably, Hawkins is not a chemicals manufacturer. This is significant because chemical compounding and distribution is under much less severe environmental regulation than is chemical manufacturing.

In calendar 2002, Hawkins generated sales of $103.9 million. About two-thirds of sales were linked to industrial purposes, while the other third was derived from water treatment. While sales were down 4.5%, profits increased by 17.8% thanks to a higher-margin mix of chemical sales, along with higher volumes and price increases in the water treatment business. All told, Hawkins generated an 8.6% net margin, while earning an 11.6% return on assets and a 16.5% return on invested capital.

Hawkins is the essence of a boring business, but from the standpoint of conservatism, there's a lot to like here. The company owns all its properties, including approximately 11 acres of land in Minneapolis, Minnesota, with six buildings containing a total of 160,000 square feet of office and warehouse space. Also, the company has a shrinking sharecount due to occasional buybacks and -- you may want to sit down for this -- no stock options. In addition, management compensation is very reasonable, and employees own 27.2% of the company. Finally, Hawkins has an admirable track record of dividend increases -- six times in the past seven years, with the current yield standing at 3.3%.

Turning to valuation, at a recent price of $10.99, Hawkins' market cap is $112.3 million. Less net cash of $20.7 million, the EV is $91.6 million. While free cash flow can be volatile, I think there's about $10 million in cash earnings power. That puts the EV-to-FCF at about 9.2.

Atlantic Tele-Network (AMEX:ANK)
First, the scary part: This company's primary operations are in Guyana, a tropical country situated along the northern coast of South America. As unsettling as that may seem, Atlantic Tele-Network has a unique stronghold in its market: It has an 80% interest in Guyana Telephone & Telegraph (GT&T), Guyana's monopoly provider of local, long-distance, and international telephone service. And who is the other 20% partner, you ask? None other than the government of Guyana itself. Nothing helps to strengthen a monopolist's position than having the government in on the take.

Headquartered in St. Thomas, U.S. Virgin Islands, Atlantic Tele-Network was established in 1987 and went public in 1991. It was in that year the company bought its 80% interest in GT&T, which had previously been 100% owned by the government. The terms of the deal provided Atlantic Tele-Network with an exclusive 20-year franchise to provide Guyana with public telephone, radio telephone, pay station telephone, and national and international voice and data transmission.

After years of successful operation, however, in 2001 the Government of Guyana announced its intention to introduce competition into Guyana's telecommunications sector. Since that time, Atlantic Tele-Network has been in on-and-off negotiations with the government, with no resolution as of yet. Meanwhile, the company continues to crank out strong profits, even amidst falling international long-distance rates.

Over the past year through March, Atlantic Tele-Network generated revenue of $73.6 million and net income of $10.3 million. Notably, revenue in the most recent quarter increased by 18%, breaking a long trend of declining revenues. While revenues have been declining for years, so have costs -- thus allowing net income to remain strong. Financial results have been strong enough to allow the company's dividend to be increased four times since 1999.

At a recent price of $19.05, Atlantic Tele-Network has a market cap of $96.2 million. Netting out cash of $28.7 million, the EV is $67.5 million. With FCF of $12.5 million, the EV-to-FCF is only 5.4. Also, the stock yields 4.6%.

More deep value next week
Next Monday, my plan is to explore some more deep-value contenders. If you know of a stock that fits my criteria, I'd love to hear from you on the Fool on the Hill discussion board or via email. Many of you regularly send me some fine stock ideas, for which I'm greatly appreciative. By the way, if you've emailed me in the past several weeks and haven't heard back from me, I apologize -- I expect to catch up on email in the coming week.

Matt Richey is a senior analyst for The Motley Fool. At the time of publication, he had no position in any of the companies mentioned in this article. The Motley Fool is investors writing for investors.