Top Five Small-Cap Stocks

Each weekday, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.

This list, updated daily, is based on data from the close of the previous trading session. Today, small-cap stocks are in the spotlight. These are stocks of companies that have market capitalizations of between $50 million and $500 million that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors.

The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.

Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.

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Rated a buy since December 2005, American Software(AMSWA) develops software and services for enterprise management and collaborative supply chains. Earnings growth of 65.0% over the past year has helped the company's stock price appreciate faster than the S&P 500.

Baring a major bear market, the stock should continue to move higher. The company has no debt to speak of, and maintains a quick ratio that demonstrates the ability to cover short-term cash needs. While American Software may harbor some minor weaknesses, they are unlikely to have a significant impact on results.