When the average investor thinks about the Automotive industry, they probably start with the “Big 3” automakers – Ford (F - Free Report), General Motors (GM - Free Report) and Fiat Chrysler (FCAU - Free Report). They might consider upstart electric auto manufacturer Tesla (TSLA - Free Report), and overseas companies like Toyota, Nissan, BMW and Volkswagen.

All of those companies are doing functionally the same thing – designing and building mass-market passenger cars, trucks and SUVs for the consumer market.

As those name-brand companies with hundreds of billions in collective market capitalization duke it out in a never-ending battle to sell the most cars, it’s easy to overlook a much less obvious(but often very profitable) niche market – specialty vehicles and parts for industrial markets.

North Carolina-based Spartan Motors (SPAR - Free Report) has been consistently growing earnings by selling high-quality and dependable vehicles to the emergency response, government service, defense and delivery markets. They design and manufacture the chassis’ and entire vehicles you see on the road as fire trucks, ambulances, municipal service vehicles and delivery trucks.

To understand how Spartan Motors got to where they are today, we’ll need to examine a bit of the company’s history. During the 1970’s The Form-Rite Corporation had supplied millions of dollars’ worth of molded plastic parts to Diamond REO trucks, which was filing for bankruptcy protection. During the bankruptcy proceedings, Form-Rite learned of a significant contract that soon-to-be-defunct Diamond REO had secured to build custom fire truck chassis.

Recognizing the potential value of that agreement, a small group of Form-Rite executives and engineers joined forces with former Diamond employees, obtained the contract and incorporated Spartan Motors, leveraging basically their entire personal net worth to build their first chassis.

Having made excellent build quality their mission, that first chassis was a huge success and a flood of additional orders poured in - mostly for more fire trucks, but Spartan also fielded requests for other custom heavy industry vehicles.

By 1984, Spartan had outgrown the Form-Rite umbrella and was spun off in an initial public offering, using the proceeds to significantly expand their production capabilities.

Fast forward to today and through a combination of organic growth and strategic acquisitions, Spartan now supplies complete vehicles and parts to huge municipal fire departments – including Chicago, San Francisco, Dallas and Buffalo – as well as delivery vehicles, defense vehicles, lighting products and ladder assemblies.

Thanks to significant earnings growth and recent upward revisions, Spartan is currently a Zacks Rank #1 (Strong Buy).

Spartan shares have significantly outperformed the broad markets in 2019, gaining 145% YTD versus 23% for the S&P 500 and 19% for the small-cap Russell 2000, of which Spartan is a member.

Even after that huge run-up, Spartan still trades at a 12M forward P/E Ratio of just 19.5X – barely higher than the S&P’s 18.8X multiple and a downright bargain for a fast-growing small-cap. That’s thanks to rapidly rising estimates for full-year earnings. Even after the big rally, Spartan’s share price hasn’t yet quite caught up with its earnings potential.

Savvy investors love to pick up little known stocks that have been flying under the radar before they are discovered by the investing public and swell in valuation. Based on its low P/E and Style Score of “A” for growth, Spartan Motors may be just such an opportunity.