Put Quest on Watch List: Under the Radar

"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

BOSTON (TheStreet) -- Stocks have had a heady run since March. The Russell 2000, a popular small-cap barometer, has soared more than 70% from its recent trough, confirming the theory that smaller companies outperform larger firms in the early stages of an economic recovery. The blue-chip Dow Jones Industrial Average has climbed 46%.

Investors' calls for a correction are on the rise amid concern share prices have gotten out of line with fundamentals. Considering recent performance, Under the Radar picks are now better-suited for your watch list than your portfolio. Keeping a list of stocks you'd like to own, and prices you'd be willing to pay, is a great habit.

Here's one to follow in the weeks ahead.

California-based Quest Software(QSFT Quote) is an independent software vendor, selling programs that support, monitor and improve other companies' applications and hardware. The value added? Quest's programs can reduce customers' expenses by reducing downtime and the need for extra personnel.

The company's second-quarter net income surged 148% to $20 million, and earnings per share climbed 163% to 21 cents. Revenue declined 5% to $164 million. Quest's gross margin remained steady at 92%, but its operating margin jumped from 3% to 13%.

Risk-averse investors can rest easy. Quest has an ideal financial position, with $284 million of cash, translating to a quick ratio of 1.2, and no debt. The company's clean balance sheet and cost-cutting appeal helped it avoid the sell-off during the recession.