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Tickers in this Article: RAIL, ARII, BNI, CSX
The market rally has nearly exhausted the population of truly undervalued businesses. Despite having rallied over 75% from its lows of $14 a share, FreightCar America (Nasdaq:RAIL) still looks like a worthwhile long-term bet. Quality Business
As the name suggests, FreightCar sells, repairs and leases freight cars that the rails use to ship essential staples like coal, steel and other bulk commodities. The business has been around since 1901 and supplies some of the biggest railroads like Burlington Northern (NYSE:BNI) and CSX (NYSE:CSX).

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As you might imagine, selling freight cars is a very cyclical business and the cycle peaked in 2006, a year in which FreightCar earned over $10 per share in earnings. In 2008, FreightCar earned about $1 a share. So the cycle is definitely bottoming and it appears that business is slowly starting to pick up.

Last week, FreightCar reported better than expected earnings of 59 cents a share against estimates of 10 cents a share. Granted, these results came against a 26% drop in sales, so while the cycle may have bottomed, don't expect anything like 2006 anytime soon.

Strong Balance Sheet Comforting
Still, FreightCar has a pristine balance sheet. It's virtually debt free with about $7.60 in net cash per share against a $25 stock price. Book value per share is over $17 and there is very little goodwill on the balance sheet. Such a strong balance sheet is very comforting during these shaky economic times.

Investors interested in this industry can also take a look at competitor American Railcar Industries (Nasdaq:ARII). The shares fetch $11.50 and there is about $2.50 in net cash per share. However, FreightCar has been in business a lot longer, has a deeper product line and a stronger balance sheet.

Patience is Bliss
The strong quarter caused FreightCar's shares to leap by 12% that day. Still once the railroads start upgrading again and it's international business ventures pick up steam, patient investors could be richly rewarded here. (For more, check out 4 Characteristics Of Recession-Proof Companies.)

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