TSR Inc (NASDAQ: TSRI) is a microcap computer consulting firm providing contract programming and project management services to a variety of private and public entity customers in the New England and Mid-Atlantic US. With earnings and free cash flow of $1.2 million to $1.4 million in each of the last three fiscal years, TSRI has no debt and over $1.60 per share in cash, for a ttm EV/EBITDA of just 0.75. The firm also pays a generous 10.7 percent forward cash dividend yield, and recently bought back over 10% of its outstanding shares at attractive levels.

Initially written up on VIC at $4 per share in January of 2008, TSRI has been more than cut in half during the recent rout in microcaps, while its cash-rich balance sheet and operating history continue to provide a solid margin of safety. The balance sheet has no debt and over $7.2 million in cash and short-term investments, which have not lost value in the credit meltdown. TSR has consistently earned more than its current $1.2M EV in each of the last three fiscal years; although results this year will suffer with the rest of the economy, TSRI should weather an uncertain environment well as more firms look to fill their needs through temporary contractors rather than rush to hire new permanent employees.

CEO Joseph Hughes owns over 40% of the common stock and has purchased more than $120k of stock on the open market at significantly higher levels; in addition, the company recently bought back 10% of its outstanding stock. The Board has authorized repurchase of an further 239,000 shares as of this October. TSR has a strong history of returning capital to shareholders, and currently pays a generous $0.05 quarterly dividend (an 11% cash yield going forward), in addition to the recent share repurchase mentioned above.

For those investing for individual accounts, the recent meltdown in the Russell makes this a particularly opportune time to accumulate beaten-down microcap names in anticipation of a strong January effect reversal in early '09. With a double-digit dividend yield, a solid balance sheet, a substantial stock buyback, and an EV/EBITDA below 1, TSRI represents an attractive addition to any microcap value portfolio.