KSW Inc. ( ) provides ventilation and piping systems to owners of industrial, commercial and residential buildings in New York City. This is an inherently cyclical business, as the company is reliant to a large extent on new construction in pretty much the only city in which it operates, and new construction fluctuates dramatically depending on the economy's state. A look at KSW's highly cyclical revenue over the business cycle is depicted below: The dramatic fall in revenues following the last recession might be exaggerated to some extent: while we give a lot of flak to companies for blaming "one-time" events (which actually tend to re-occur) for revenue/earnings shortfalls, if there ever was a good "one-time" excuse for a company in NYC reliant on construction, September 11th is it. Nevertheless, the nature of the company's business is still cyclical: the company's backlog has been dropping fast, as several buildings contracted for development have been delayed or scrapped due to the recession. Therefore, what's important to consider is the company's lasting power, as measured by the flexibility of its cost structure. In the case of KSW, fixed costs are a small percentage of operations, as the company only purchases what it needs to install (therefore costs are largely variable) resulting in fixed assets comprising only a fraction of the company's total assets. Furthermore, debt servicing requirements are minimal, as the company has a debt position of $1 million, an amount which is dwarfed by its cash holdings of $17 million. The stock, however, has been pummelled by the market, and trades for less than the company's cash on hand. Considering the fact that the company has a flexible cost structure and a cash position greater than its market price, investors are being offered the company's future earnings for free.