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Top 5 Small-Cap Stocks for May 1

TSC Ratings TheStreet.com Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis. Each business day, we compile 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 or 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.

Pervasive Software (PVSW) provides embeddable data management and integration software products to customers worldwide. The stock has been rated a buy since April 2008. This rating is driven by a few notable strengths, including the company's solvency, attractive valuation levels, and growth in revenue and net income.

For the third quarter of fiscal 2009, the company reported revenue growth of 21% year over year. This growth beat the industry average of 6.9%, and appears to have trickled down to the company's bottom line, as EPS improved from 5 cents to 10 cents per share. Pervasive's net income increased significantly in the third quarter, rising 101.4% from $940,000 to $1.9 million. Net operating cash flow also increased slightly, rising 7.8% to $2.1 million. In addition, Pervasive has no debt to speak of, which we consider to be a relatively favorable sign, and a quick ratio of 4.3 clearly demonstrates the company's ability to cover its short-term cash needs.

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