This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

July 8, 2011 - Neenah Paper, Inc. (NP-NYSE), together with its subsidiaries, engages in the production and sale of fine papers and technical products worldwide. The company operates through two segments, appropriately named: Fine Paper and Technical Products.

The Technical Products segment produces filtration media and durable, saturated, and coated substrates for various end uses, including tapes, premask, abrasives, labels, medical packaging, decorative components, wall covering, and image transfer papers. This segment offers its products under the JET-PRO, SofStretch, KIMDURA, MUNISING LP, PREVAIL, NEENAH, Gessner, and varitess brand names.

The company sells through authorized paper distributors, converters, sales representatives, customer service representatives, and direct sales. Neenah Paper, Inc. started trading in 2004 as a spin off from Kimberly Clark and is headquartered in Alpharetta, Georgia. The original company was founded in 1873.

Everyone knows paper is dead, done, completly useless in the digital age. Tell that to Neenah's management. Or its customers. Sales are notably higher as the worst of the recession seems to be over. In 2008, revenues were $732.3 million, then dipped to $574 million. Last year, they rebounded to $657.7 million. This year, 2 analysts have a consensus estimate of $693.5 million up 5.4%, then see next year finishing with $703.35 million, another 1.4% increase. Not heart stopping but still improving.

Earnings, on the other hand, are skyrocketing. After two years of losses
(-$3.23 in 2008, then -12 cents in 2009), 2010 roared back to $1.47. This year, 2 analysts have a consensus of $1.85 (up 25.8%), then see $2.08 in 2012. For the June quarter, expect 48 cents a share, well above the 41 cents in last year's second period. For the third quarter, analysts expect 42 cents a share, up 40% from last year's 30 cents in the third. First quarter results were 54 cents, a 12.5% increase over last year's first period.

Here's what the new CEO had to say about the first quarter: "We were pleased with the solid bottom line results and year-on-year gains from both business segments in the first quarter as our teams overcame more than $9 million of higher input costs," said John O'Donnell, Chief Operating Officer. He continued, "In addition, we successfully completed important initiatives in the quarter, including start up of a second meltblown line in Germany to support growth in premium filtration products, expanded direct sales of fine paper envelopes, and redemption of almost one-third of our Senior Notes, which will significantly reduce interest expense."

As mentioned in the quote, management is busy expanding its product line and reaching new markets. Most of the new products have higher price points than the existing portfolio. Expect operating margins to increase as these new products contribute to the top and bottom lines.

It's the Technical Products division currently that's pulling the most weight because auto manufacturing is going strong. In 2010, Technical Products made up 58% of total revenues. Forty two percent came from Fine Paper. Best sellers were flitrations, meltblown technologies, labels, abrasives, and wall coverings. Several Fine Paper products were hurt by lower demand in the printing and writing markets. Profits from the division were lower due to higher and volatile commodity prices.

Essential numbers: Trailing P/E is 14.53 while Forward P/E is 10.75. Price to sales ratio is .49. Price to book is 1.83. Operating margin for the last 12 months was 7.87% while Profit margin was 3.63%. Return on equity was 15.13% and Return on assets was 5.42%. Total cash is $10.6 million for 71 cents a share. Current ratio is 1.89. Book value per share is $11.90. Beta is 1.83. In the last 52 weeks, the stock is up 22.15%. There are 14.92 million shares Outstanding. Management owns .85%. Institutions have 84.1% of the stock. Dividend yield is 2%.

Aggressive investors will want to spend more time with NP. It's very small but growing. Be aware that this stock went from its all-time high of $45.60 to its all-time low of $3.30 in less than 2 years (2007 to 2009). Can you say volatile?