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TheStreet Open House

STOCK PICKS: Top Five Small-Cap Stocks for Oct. 17

Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- 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 $50 million to $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. Neogen (NEOG) and its subsidiaries develop, manufacture and market products dedicated to food and animal safety. Our buy rating for Neogen has not changed since February 2003, based on strengths such as the company's robust revenue growth, impressive record of EPS growth and expanding margins.

For the first quarter of fiscal 2009, the company reported that its revenues, net income and EPS all represented quarterly records. Revenue growth was reported at 25.7% year over year, with revenues appearing to help boost EPS, which improved 17.2%. Net income also increased, rising 24% from $3.01 million in the first quarter of fiscal 2008 to $3.73 million in the most recent quarter. Neogen attributed its record results to the assimilation of recent acquisitions and significant growth in the company's primary product lines. Additionally, the company's gross profit margin is rather high at 54.70%, but Neogen has managed to decrease this number over the last year.

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