Zack Buckley will be speaking at the upcoming Value Investing Congress taking place May 6th & 7th in Las Vegas. To learn more please visit www.ValueInvestingCongress.com/VIL.

Business Overview

SMTC Corp (SMTX) is a rapidly growing electronic manufacturing services (EMS) business with an above average return on equity - approximately 25% in 2012. The company’s services include product design, printed circuit board assembly production, enclosure fabrication, systems integration, and testing services. SMTX is growing 50% year over year in the first 9 months of 2012 and positioned to grow in 2013. While the growth rate will slow dramatically going forward closer to the industry growth rate, SMTX is in an industry that is growing at 10% annually and benefiting from significant secular tailwinds. The company requires low capital expenditures and generates substantial free cash flow. Perhaps most importantly for a small cap business, SMTX’s management and board of directors are shareholder-friendly with high insider ownership and recent insider buying. So what would you pay for a business like this if you knew industry peers traded between 8-13x earnings and 5-6x EBITDA?