Top 5 Small-Cap Stocks: Hawkins, Balchem

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

The following small-cap companies have market values 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 Quote) blends and distributes bulk and specialty chemicals for water treatment, and industrial and pharmaceutical use.

The numbers: Fiscal fourth-quarter revenue rose 32% to $68 million as net income surged 194% to $5.1 million and earnings per share climbed 182% to 48 cents. The operating margin increased to 11% and the net margin jumped to 8%. The company has zero debt and ample liquidity, as reflected by a quick ratio of 2.1.

The stock: Hawkins has increased 30% in 2009, outperforming all major U.S. indexes. Yet the stock trades at a price-to-earnings ratio under 9, indicating a discount to the market, and pays a 2.6% dividend yield.

American Physicians Group(AMPH Quote) provides medical professional liability insurance for physicians and health-care providers in Texas. The company also has an investment arm that provides advice and asset management to institutions and wealthy individuals.

The numbers: First-quarter revenue fell 2% to $19 million as net income ascended 40% to $4.7 million and earnings per share increased 46% to 67 cents. The operating margin surged to 38% and the net margin climbed to 25%. The company boasts minimal debt and ample liquidity, as reflected by $38 million of cash.

The stock: American Physicians Group is up 7% in 2009, outperforming the Dow Jones Industrial Average and the S&P 500. The stock trades at a cheap price-to-earnings ratio of 8, but offers a weak 1.3% dividend yield.