Under the Radar: TreeHouse Has the Goods

"Under the Radar" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

If we get stuck in sluggish economic growth over the next few quarters -- or even years -- discounters' stocks will remain appealing.

Consumer staples, or products that people need to live, demonstrated remarkable stability last year. But some analysts say investors will dump those stocks in favor of consumer-discretionary shares once Americans get more money in their pockets. That trend would favor companies such as Walt Disney(DIS Quote), Time Warner(TWX Quote), Nike(NKE Quote) and Target(TGT Quote).

The recession that followed a borrowing binge has prompted Americans to save at the fastest pace in 15 years, a report last week showed. The household savings rate jumped to 6.9% in May, compared with, incredibly, zero in April 2008. Thrifty consumers may help restrain economic growth through next year, some economists say.

Here's a small-cap stock with strong fundamentals that's poised for further gains this year if economic growth is modest.

Westchester, Ill.-based TreeHouse Foods(THS Quote) is a food manufacturer specializing in private label, or "generic brand," pickles, non-dairy coffee creamer, soup, infant food, salsa and other products. (Apparently, even in trying times, Americans cannot live without pickles.) TreeHouse, which claims it is the largest U.S. pickle company based on sales volume, just posted a record first quarter.

Although revenue declined a marginal 1.4% to $355 million, net income surged 518% to $13 million, and earnings per share climbed 457% to 39 cents. Margins have expanded since the prior year's first quarter.

The company's glaring weakness is a lame financial position. Its balance sheet holds only $2.1 million of cash and more than $481 million of debt. That works out to a quick ratio of 0.48. TheStreet.com Ratings' model favors companies with quick ratios above 1. A debt-to-equity ratio of 0.76 indicates a less-than-ideal capital structure.