Investors May Not See ARTW Plowing Ahead

Agriculture machinery manufacturer Art's-Way Manufacturing Co. (NASDAQ: ARTW) has been chosen for this week's "SPOT Feature" in the Knobias Small-Cap ClipReport. Each week, Knobias scours the small-cap universe to find overlooked companies with sound fundamentals and one or more growth catalysts on the horizon. The weekly "SPOT" feature may be accessed via our daily ClipReport newsletter (free to all subscribers). To receive the Small-Cap ClipReport daily, please visit: http://www.knobias.com/front/product/clipreport/

Art's-Way Manufacturing Co. (NASDAQ: ARTW), located in Iowa, manufactures and distributes farm machinery niche products including animal feed processing equipment, sugar beet and potato harvesting equipment, edible bean equipment, land maintenance equipment, finished mowing, crop shredding equipment and seed planting equipment. Art's-Way also produces haylage machinery for OEMs, manufactures moldboard plows, truck bodies, and pressurized tanks and vessels.

The BULLS Say...

Growth in Disguise. ARTW is a small-cap ag equipment stock suffering from misunderstood growing pains. GAAP earnings, prior to 2005, included tax benefits and FY-05 was an exceptional year that included a new acquisition. Unfair, year-over-year comparisons, acquisition integration costs, mixed margins and a retiring CEO may have the market under-realizing ARTW relative to peers. Entering its strongest seasons, backlog is up +90%, integration costs are fading, margins are expected to improve, a competitor has ceased operations and Art's-Way has a new CEO with marketing expertise from Motorola (MOT) and Case New Holland (CNH). This $11M stock trades below annual sales, expects to continue paying annual dividends and could help support ethanol production from sugar beets.

The BEARS Say...

Inorganic Growth and Ethanol Hype. ARTW claims that the 2006 results are being compared to an extraordinary 2005. Most of 2006 sales and backlog growth has been due to the acquisition of Vessels. Also, beware of rumors of ARTW being an ethanol play. Knobias was unable to find any mention of ethanol related to ARTW, although they are a leading producer of sugar beet harvesting equipment.

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Each week, Knobias scours the small-cap universe to find overlooked companies with sound fundamentals and one or more growth catalysts on the horizon. This search typically features a small-cap stock exhibiting strong growth while undervalued relative to public peers. SPOT selections tend to be "under-priced" due to lack of coverage or a failure for the marketplace to fully understand "the story." SPOT companies must meet the same basic criteria as our Small-Cap ClipReport, i.e. under $500M marketcap...banks, ETFs, funds and utilities are excluded. Furthermore, SPOT selections must be fundamentally sound with growth, profitability (or near) and clear prospects for price appreciation. Knobias is never compensated for SPOT selections, and NO position will be held in SPOT stocks by Knobias, its management or staff while the stock is being highlighted.

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