If you're looking for a stock to clean up, it could pay to consider

Met-Pro

(MPR)

.

This tiny Pennsylvania company with just a $67 million

market cap makes products that you have probably never heard of, but they make your life cleaner and safer. Met-Pro manufactures air and water pollution control systems, fume scrubbers and odor-control equipment, handling equipment for corrosive and high-temp fluids, filter products for drinking water and industrial and clinical applications, dust-filtration systems, specialty chemicals for controlling corrosion and lead and copper in public drinking water, and air ventilation systems for laboratories.

What this means is, if you are breathing clean air or drinking pure water, it's likely Met-Pro had something to do with it. From medical laboratories to chip fabrication, the company provides purification systems that keep industries clean. The company markets its products in the U.S. and 50 foreign countries.

How diverse are they? Met-Pro recently completed the filtration system of one of the five-largest public aquariums in the world, Spain's Parque Oceanografico de Valencia.

Clean Financials, Cheap Price

Speaking of clean, Met-Pro's balance sheet sparkles. The company boasts a debt-to-market-cap ratio of 0.15 and has averaged $3.5 million per year over the past five years in stock buybacks, all the while growing cash flow by compound annual growth rate, or CAGR, of 15.4% and sporting an average return on equity of just over 15%.

And, talk about inexpensive: Met-Pro's book value is $7.73, with the stock trading at just over 1.4 times book value. By comparison, the average industrial-machinery company trades at 2.1 times book while the

S&P 500

trades at nearly 3.2 times average book value.

An analysis of earnings also suggests the company may be undervalued. The company currently trades at just under nine times this year's earnings estimate of $1.22 (the company's fiscal year ends in January) and just 8.5 times 2003 estimates of $1.28. Again, the average industrial machinery company trades at just over 34.5 times current year earnings. The company's earnings CAGR over the past seven years comes in at just over 20%.

While small size may be one reason it trades at such a discount, the stock has sported an average earnings multiple of 14.1 times during the past 10 years, suggesting the stock is historically cheap. There is no analyst coverage and only small institutional sponsorship for the stock.

One more thing: The company pays an annual dividend of 34 cents for a yield of 3.2%. And, not only is the company committed to the payout, Met-Pro has increased the dividend an average of 10% annually over the past five years. Not a bad payment to wait for a micro-cap to produce results.

Sales Slip, Visibility Needed

While most recent history is rosy for Met-Pro, the first two quarters of the current fiscal year have been challenging. Sales in the first half of fiscal 2002 dropped 6.4% when compared with fiscal 2001, largely driven by a 13.3% decline in the first quarter. The drop in sales led to a 3.4% decline in earnings for the first half of the fiscal year and will likely lead to a similar decline for the balance of the year.

And, while Met-Pro posted slightly stronger sales in the second quarter, when compared with the prior year, Chairman William Kacin acknowledged visibility going forward was difficult and attempted to assuage overly optimistic expectations.

"We all continue to hear predictions that the third and fourth quarters will see increased business activity and we are all cautiously optimistic that this will be the case," Kacin noted in the company's quarterly report. "Regardless of the level of activity presented to us by the economy, we continue to have confidence in the ability of our employees and our products to deliver results of which we can be proud."

Such an esoteric statement is almost always a prelude to a difficult quarter. However, the sales and earnings estimates for the balance of the year assume no growth over last year's levels. While a significant deterioration of business activity is possible if the economy continues to stagnate, the stock's selloff in August and September suggests investors were preparing for the worst.

Interestingly, this company and its water and air purification products may actually see an indirect boost from sales related to the recent terrorist attacks. Municipalities and corporations are reviewing purification systems and are likely to consider enhancements as a result. In addition, increased testing laboratory activity should expand Met-Pro's opportunities.

The bottom line: Met-Pro is clean and cheap. And, while there is a chance it could get cheaper if sales disappoint, the dividend provides some protection. At current prices, it's a nice play. If it flirts with $10 again, it becomes compelling.

We like cleanliness and give Met-Pro 2 1/2 barrels. Without recent sales weakness, it gets three barrels-plus.

For an explanation of our barrel rating system, see our recent description.

The idea for Met-Pro came from a loyal reader. Do you have candidates for Bottom of the Barrel? If so, shoot me an email with the company name, why you think it qualifies and your full name and hometown. If we profile your suggestion, we'll send you a

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gift to commemorate your pick.

Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to

Chris Edmonds.