Benjamin Graham often spoke of the margin of safety, the point at which a stock trades for less than its intrinsic value. This is a very subjective way of looking at stock prices because everyone's definition differs. An easier method for identifying real value and at the same time providing the ultimate margin of safety is to screen for stocks with lots of cash and no debt.

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I'm no Suze Orman, but it stands to reason that if personal finance gurus believe individuals should carry little debt and have an emergency fund in reserve, the same should apply to companies. By limiting my search to the services sector, I've been able to come up with a list of five companies with at least $100 million in cash and no debt whatsoever. I think you'll find all five are relatively safe investments.

Company Cash Market Cap
(in billions)
KBR Inc. (NYSE:KBR) $1.15 billion $2.76
Apollo Group (Nasdaq:APOL) $885.82 million $9.46
Expeditors International (Nasdaq:EXPD) $741.69 million $7.78
Bed Bath & Beyond (Nasdaq:BBBY) $670.21 million $7.69
Gen-Probe Inc. (Nasdaq:GPRO) $505.18 million $2.28

Analysts with Optimistic Expectations
Two analysts recently increased KBR Inc.'s 2009 earnings per share (EPS) estimates. Stifel Nicolaus & Co. analyst Barry Bannister upped yearly earnings for the engineering company from $1.17 to $1.35 a share, thanks to an ever-increasing group of projects for the company. Even more enthusiastic was UBS analyst Steven Fisher's buy call. Fisher estimates 2009 earnings per share at $1.65, which is far higher than Bannister.

Even more important than analyst estimates is the fact that the company performed well in the fourth quarter, increasing revenues by 27% at a time when projects and contracts should be in peril. Add in $1.15 billion in cash and no debt, and it certainly helps buffer any downturn in revenue, which appears unlikely. (We show you why some of these companies stand apart from the herd see Spotting Cash Cows.)

Education and Expediting
Who isn't upgrading their education these days? It seems you can't even serve fries at McDonald's (NYSE:MCD) today without a master's degree. While I'm obviously being facetious, educators like Apollo Group are clearly benefiting from this recessionary trend towards bettering ourselves. Credit Suisse analyst Kelly Flynn sees 2009 revenues and EPS up 25% and 41% respectively. Despite the good news, Flynn downgraded Apollo to neutral from outperform on April 21, dropping her price target from $95 to $65, which is slightly higher than where it currently trades. It seems the Department of Education is going to take a much closer look at the operations of for-profit educators.

Seattle-based logistics company Expeditors International has a glass that is either half-full or half-empty depending on your viewpoint. Negatives include fourth-quarter freight volumes that were off 20% with little chance of an improvement in 2010. On the plus side, Robert W. Baird & Co. analyst Jon Langenfeld believes it has excellent long-term growth potential. With valuation metrics like price-to-sales and price-to-book well above one, investors might want to wait for the stock price to drop below $30 before picking up some shares.

Retail Revival
While it's not very likely in the immediate future, Bed Bath & Beyond continues to benefit from the bankruptcy of rival Linens 'n Things. Despite same-store sales falling 2.4% in 2008, EPS in the fourth quarter beat analyst estimates by 11 cents. Even better, the company produced free cash flow of $368 million or $1.42 per share in 2008, despite an unprecedented drop in retail traffic. However, Investopedia's Ryan Fuhrmann believes the good news is already reflected in the price of its stock and better alternatives exist, like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). While that may be true, BBBY's cash position is an enviable one. (Find out how a company spends its money and whether there will be any left over for investors, read Analyze Cash Flow The Easy Way.)

Test Results
Diagnostic test maker Gen-Probe's first-quarter revenues dropped 5% to $116.2 million from $122.6 million year-over-year. However, if you back-out royalty and license revenue, sales actually increased 9.8% from $104 million in Q1 2008 to $114.2 million in Q1 2009. Looking ahead, the company expects EPS in fiscal 2009 between $1.85 and $2.00 a share. Trading for 4.3 times cash, this should be a safe place to put your money for the next couple of years.

Bottom Line
The position of having a lot of cash and no debt is definitely appealing for investors. While all five companies discussed fit the description, KBR Inc. shines through because of the anticipated infrastructure projects being undertaken by the Federal government.

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