It’s not necessarily amazing how a micro cap company with huge potential can start out as an unknown to the market. It is amazing, however, how and unknown micro cap stock can start out as an unknown – realize all of its potential (and more) – and still remain basically an unknown. Hurco Companies (HURC) has done that very thing…shares are up $2262% over the last five years, yet most investors still haven’t heard of the company.

We came across Hurco in a routine scan of small and micro cap stocks, searching for unknown names with good fundamentals that could make for great trades. The company certainly made the cut.

Hurco makes the software and tools used in metal cutting and forming. And apparently, business has been good since 2002. The company did just under $100 million in sales in 2004, $125 million in 2005, $149 million in 2006, and they’re on track to do somewhere around $184 million in 2007. Better still, they’re profitable. (What a novel idea!)

The ratios look good too, with a P/E of 12.8 and a forward-looking P/E of 10.2. Net margins are 11.2%, and quarterly earnings have been growing at 35.8%. A price/sales ratio of 1.5 rounds out the undervalued scorecard.

That being said, consistently reliable fundamentals aren’t a bullet-proof shield…HURC has taken some lumps of late - like most stocks have. The difference with HURC has been the rebounds…investors have usually been rewarded for stepping into a Hurco position when the stock dipped.

On the other hand, the most recent dip has been especially harsh, raising the question of whether or not this pullback would lead to a revival this time around. In a case such as this, most traders would say (and we wouldn’t disagree) to wait for the chart to make a convincing improvement before migrating back into this strangely undervalued company. If they can keep delivering what they’ve been delivering, we anticipate a rebound soon.

Side note: We suspect this weakness may have been prompted by worries of a recession. A company like Hurco may be the first to suffer if the economic reigns do get tightened. We’ll just say this…far more recessions have been predicted than have actually come to pass. If the market is collectively wrong again about an economic contraction, Hurco could recover in a hurry. So, you may want to keep it on an oft-seen watchlist.