Top Five Small-Cap Stocks

These strengths outweigh the fact that the company shows low profit margins.

---

Preferred Bank(PFBC Quote) operates as an independent commercial bank in California. It has been rated a buy since December 2005. The company's EPS increased by 23.4% in the second quarter compared with the same period last year, continuing a two-year pattern of positive EPS growth. Net income growth over the same period exceeded that of both the S&P 500 and the commercial bank industry average, and return on equity improved slightly compared with the same quarter a year ago.

With strengths like these, the lackluster performance in the stock itself is not cause for concern.

---

CAM Commerce Solutions(CADA Quote) engages in the design, development, marketing, installation and servicing of integrated retailing and payment processing for brick-and-mortar and e-commerce businesses. It has been rated a buy since August 2005. The company's EPS improved by 100% in the second quarter of 2007 compared with the same period last year, and it has no debt to speak of. Although the company may harbor some minor weaknesses, they are unlikely to have a significant impact on results.

---

The holding company for Tennessee-based Greene County Bank, Greene Bankshares(GRNB Quote) has been rated a buy since August 2005. Its strengths include expanding profit margins and net income. In the second quarter of 2007, earnings rose to 29% to $7.09 million $5.48 million a year earlier. Revenue growth outpaced the industry average during the same time frame, as did EPS, which improved by 12.7%. The company has demonstrated a pattern of positive EPS growth over the past two years.