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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Consolidated Water(CWCO Quote - Cramer on CWCO - Stock Picks), which operates seawater desalination plants and water distribution systems, has been rated a buy since December. The company has a largely solid financial position with reasonable debt levels and good cash flow from operations. Its first-quarter revenue rose 37.8% on the year, and its debt-to-equity ratio of 0.22 is below that of the industry average. This suggests very successful management of debt levels.

The company's strong revenue growth has contributed to a steady track record of EPS growth over the past two years. This has helped Consolidated Water's stock price appreciate by 28.46% in the year prior to July 13. While this price level is somewhat expensive compared with the rest of its industry, the company's strengths justify the higher price level. Its positives also outweigh a somewhat disappointing return on equity.

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