Outside of finding a great undiscovered microcap with huge potential, my next favorite thing is finding a boring small or midcap company. These have the potential to become very large and return multiples on your investment, and they also fit into the Peter Lynch criteria of buying stocks that don’t seem exciting.

Midcap stocks, however, often have consistent growth and earnings because they create products that a lot of industries or people need. They often provide some kind of infrastructure or supply parts for things that are in widespread use.

This week I discovered Snap-On Inc. (SNA). Well, I should say I discovered SNA stock this week. I’ve seen Snap-On devices in auto mechanic workshops from time to time, and that should have been a tip-off. Anything that deals in the automotive market, like parts and tools, is going to be a winner because there are zillions of cars, and they always need repair and maintenance.

Snap-On’s Solid Business

It turns out that Snap-On offers a massive inventory of product through four different segments:

Hand and power tools, as well as storage products, fall under their Snap-On Tools Group. Meanwhile, its Commercial & Industrial Group, and Repair Systems & Information Group handles diagnostic, service and repair information products. And then there’s Financial Services to take care of making sure you pay for all those expensive repairs.

The company has expanded to include computerized management systems to handle all the business aspects a vehicle repair shop needs. Point of sale, parts catalogues, OEM purchasing services, along with warranty management systems and analytics — all the things you watch your mechanic take care of in the office — are all part of Snap-On.

How about when the mechanic actually does certain services that require particular machinery? Yep. Snap-On has that covered with wheel alignment equipment, vehicle lifts, test lane systems, collision repair equipment, air conditioning and brake and fluid service equipment.

You never realize just how amazing the American economy is until you see that some company somewhere made all those machines used to service your car.

Nor is the company limited to vehicle repair. Snap-On’s products extend to aviation, agriculture, construction, government, military and mining.

SNA Stock Running Smooth

And the future looks bright for SNA stock, considering that Snap-On just reported impressive earnings. Net income came in at $103.7 million, or $1.76 per share, beating the $1.61 estimate, which was a 23% increase year-over-year. This came on a 7% YOY increase in sales. Gross margin increased 48 basis points, and operating margin increased 142 basis points to 16.2%.

The company is a very sound financial shape. It has $125 million in cash and $860 million in long-term debt, on which debt service is only about 6% interest.

The company is pushing into emerging markets to increase its business.

As for valuation, FY14 estimates are for $6.96 per share of SNA stock, increasing to $7.63 next year. If this quarter’s beat is any indication, though, those numbers might be too low. SNA stock trades at 18x estimates for this year, on earnings that are estimated to grow 16%.

I think SNA stock is a good buy here. It’s certainly looking like a growth stock that you aren’t overpaying for. You could argue that Stanley Black and Decker (SWK) and Danaher (DHR) are competitors. I happen to love both of those companies as well, and they are worth checking into.

And if you like the business, you might also look to the less-diversified auto part dealers like Advance Auto Parts (AAP) and AutoZone (AZN).

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• 3 Banks to Buy After Earnings

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at pdlcapital66@gmail.com and follow his tweets at @ichabodscranium.