Top 5 Small-Cap Stocks for June 26

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TSC Ratings TheStreet.com Ratings provides exclusive stock, ETF and mutual fund recommendations using proprietary tools. Our "safety-first" approach aims to reduce risk while achieving performance 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.

Today, small-cap stocks are in the spotlight. These companies have market capitalizations between $50 million and $500 million and receive "buy"-ratings from our proprietary quantitative model, which considers more than 60 factors. They are ordered by their potential to appreciate.

Hawkins(HWKN) blends and distributes bulk and specialty chemicals for water treatment and industrial and pharmaceutical use. We have rated Hawkins buy since January 2003.

Fiscal fourth-quarter revenue ascended 32% year over year to $68 million as net income surged 194% to $5.09 million and EPS climbed 182% to 48 cents. Gross, operating and net margin ascended 225, 694 and 413 basis points to 22%, 11% and 7.5%, respectively. Return on equity increased 908 basis points to 17%, and return on equity surged 1,186 basis points to 23%. The company has zero debt and ample liquidity, as reflected by a quick ratio of 2.1.

Shares of Hawkins have ascended 43% in 2009, far outperforming the Dow Jones Industrial Average and the S&P 500. Yet the stock trades at a price-to-earnings ratio under 10, indicating a sizable discount to the market average of 14 and the chemicals peer average of 20. The stock offers a weak .26% dividend yield.

Balchem(BCPC) provides specialty performance ingredients and products for the food, nutrition, feed, pharmaceutical and medical sterilization industries. We have rated Balchem buy since June 18, 2007.