Dirt Cheap, Asset Heavy, and Off the Radar
A Classic Cigar Butt: $100M in Sales, $100M in Assets, $13M Market Cap
“Found a company with $100 million of sales, generates $10 million of free cash flow, the market cap is $13 million and the enterprise value is $33 million. They also own all of their facilities and equipment which cost over $100 million.”
That is basically the thesis.
It is all you need to know.
The company is cheap, they own assets and they generate free cash flow. Despite the cheap stock, I have yet to see a single person write this company up.
Here is a little more context on the thesis.
The market cap is $13 million and with $20 million of net debt, the company has an enterprise value of $33 million.
Sales have rapidly expanded over the past five years. In 2021, sales were up 16%. In 2022, sales were up 22.5%. In 2023, sales were up 20.2%. In 2024, sales flattened out and were only up 0.8%. And so far in 2025, sales are down 6%.
Even though sales are down so far in 2025, the company has started to see operating leverage, and the company should be a tariff beneficiary.
The company is an auto supplier to the big three automobile manufacturers. All of the company’s facilities are located in Michigan and any increase in domestic demand will benefit the company.
General Motors just announced they will be expanding the production of the Cadillac Escalade to an assembly plant in Michigan. In addition, General Motors plans to invest $4 billion in U.S. facilities, which they announced just this June. The company should benefit from this General Motors expansion as that is right in their back yard.
The company successfully transferred a pension plan to an insurance company in 2024. This transfer will continue to pay eligible retirees their benefits, while relieving the company of any further funding liability. This should increase cash flows meaningfully as employee pension benefits have been as high as $2 million in recent years.
Total invested capital in this enterprise is substantial. On the books, gross property, plant and equipment totals $144 million. This includes $387k of land, $12.3 million of buildings and $131 million of equipment. The margin of safety is real with owned real estate including: a 200k sf plant on 25 acres of land, a 100k sf plant, and a 47k sf plant.
The company also owns substantial current assets including $20 million of inventories, $18.4 million of accounts receivable, $1 million of company owned life insurance, offset by only $10.1 million of accounts payable.
Revenues are around $100 million. In 2024 they generated $5.1 million of operating income, $9.1 million of cash from operations and spent $1.2 million in capex. The company is trading at 4.0x 2024 free cash flow.
The stock is dirt cheap. It is a typical old school Buffet play. A company trading significantly below liquidation value and generating cash. The management team owns around 42% of the shares outstanding. There are no super voting shares. I am not sure who owns the remaining float. But anyone who can get control of a large block of stock could potentially enact some change.
If you are an activist investor, apply here!
Let’s dig in…
Federal Screw Works $FSCR manufactures and sells industrial component parts to the automobile industry. The company operates out of three facilities Big Rapids (200k sf and on 25 acres), Romulus (100k sf), Traverse City (47k sf) and Novex Tool (19k sf which is leased and not owned). All of these facilities are based in Michigan. Components produced include cold formed and machined pins, including piston pins, planetary and differential gear shifts and oil pump and steering shafts. Three customers (Ford, General Motors and Stellantis) accounted for 72% of net sales in 2024. 99% of sales are to the automotive industry. The company was formed in 1917 and is operated by the ZurSchmiede family.
Investment Thesis:
Federal Screw Works is a cheap stock. With 1.38 million shares outstanding and a stock price of $9.45, the company has a market cap of just $13 million. With $222k of cash on the balance sheet and $20 million of debt, the enterprise value is $33 million.
The company was the victim of the Great Recession. In the early 2000s, the company was generating $100 million of sales and around $3-4 million of operating income. At the peak the company had a share price of $38 and a market cap of $55 million. When the Great Recession hit, sales fell to $35 million and the stock price collapsed to under $1.00 per share.
Over-time, sales have slowly recovered and the company continued to generate a healthy level of EBITDA. In 2023, the company’s sales broke $100 million, the first time in almost twenty years. That was on the back of 16% growth in 2021, 22.5% growth in 2022 and 20.3% growth in 2023. Sales growth slowed to 0.8% in 2024 and the company put up $103 million of net sales. So far in 2025, sales are down, but the company remains profitable.
Operating leverage has started to kick in. In 2024, the company generated $5.1 million of EBIT or a margin of 5.0%. This is up from $3.2 million in 2023 and a 3.1% operating margin. With sales down in 2025, I am forecasting EBIT for the full year of $3.9 million or a 4.0% margin.
I think the company will be a tariff beneficiary as all of their facilities are located in Michigan and they are serving the big three auto manufacturers. General Motors announced and expansion and investment of $4 billion into Michigan on June 15th, which should benefit Federal Screw Works. In addition, other auto manufacturers have announced similar investments (here and here). Owned manufacturing facilities in the rust belt should do well in a tariff induced world.
The company also recently executed on a pension plan transfer in 2024. This transfer removes all future funding liability from the company. The pension funding runs through cash from operations in the line titled “employee benefits”. It has been a significant outflow of capital. Over the past five years, the average outflow has been $1.2 million per year. If the company is able to save $1.2 million per year in future funding liabilities, and using a 15% discount rate, this should add $8 million in value to the enterprise for shareholders.
The best part about this company is the sheer level of assets that they own. The company owns a 200,000 SF facility in Big Rapids, Michigan on 25 acres of land. They also own a 100,000 SF facility in Romulus, Michigan. Finally they own a 47,000 SF facility in Traverse City, Michigan. Industrial real estate in Big Rapids is selling for $57/SF, putting a value of $11.4 million on the Big Rapids facility. Industrial real estate in Romulus is selling for $89/SF putting a value of $17.8 million on the Romulus facility. Finally, industrial real estate in Traverse City is selling for $144/SF putting a value of $6.7 million on the Traverse City facility. Total value for the real estate is $36 million, which does not include equipment that had a total cost of $131 million.
The company also owns significant current assets including $20 million of inventories, $18.4 million of accounts receivable and $1 million of company owned life insurance. This is only offset by $10.1 million of accounts payable and a handful of payroll and taxes.
The valuation is pretty darn cheap. In 2024, the company generated $9.1 million of cash from operations and spent $1.2 million on capex. Free cash flow was $7.9 million. If the company can continue to generate at least $100 million of sales, the company should be able to consistently generate $6-7 million of free cash flow. Levered free cash flow yield would be north of 20%.
The company does have substantial net debt of $20 million and is 100% concentrated to the automotive industry. If there is a significant downturn in the automotive market, the company’s sales will fall, along with free cash flow. In addition, the company trades on the pink sheets and the stock trades by appointment. However, given the large margin of safety, I think an investor buying at this valuation will protect his capital.
Conclusion
Federal Screw Works ($FSCR) is the kind of investment you read about in old-school Buffett letters—capital-intensive, asset-rich, neglected by the market, and throwing off real free cash flow. Despite generating $10 million of annual free cash flow and owning real estate and equipment that cost over $100 million to build, the company trades at a market cap of just $13 million and an EV of $33 million.
This is a textbook cigar butt with a few good puffs left—except the puffs here might just be worth a full pack.
The business has clawed its way back from the Great Recession, posting strong sales growth in recent years, and has started to see operating leverage. With pension liabilities now off the books, cash flow has improved further. The real estate value alone likely exceeds the entire enterprise value. The stock is trading at 4x free cash flow and offers a 20%+ yield on that cash—an absurdly cheap multiple for a business that’s profitable, strategically located, and tied into long-term OEM relationships with the Big Three.
Yes, it’s illiquid. Yes, it’s an obscure pink sheet company. And yes, it’s concentrated in the cyclical auto industry. But those risks are offset by a fortress of hard assets, consistent cash generation, and a management team that owns 42% of the shares outstanding.
This is not a flashy growth story. This is a mispriced balance sheet hiding in broad daylight. If you’re a value investor who believes the market still occasionally forgets how to price companies, FSCR might be your reminder.
In short: the stock is dirt cheap, the downside is protected by tangible assets, and the upside? It might just surprise you.
If you’re an activist investor with a taste for rust belt value and illiquid gems—your move.
New to this; cannot see where or how to buy the stock.