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Miller Tabak's Best Small-Cap Stock Picks

BOSTON (TheStreet) -- Miller Tabak is a relative newcomer to Wall Street, but the firm has rapidly expanded trading and research by generating unique investment strategies. Its Best Ideas for 2011 comprises 10 stock picks. Three of its four small-cap selections are lesser followed and may offer significant upside in 2011. Here is a closer look.

3. Cracker Barrel Old Country Store (CBRL) owns and operates Southern-themed restaurants.

Fundamentals: Cracker Barrel's stock has soared 45% in the past 12 months. Fiscal first-quarter revenue ascended 3% to $599 million, but net income increased 32% to $24 million, or $1.01 a share. The gross margin remained steady at 72% and the operating margin widened from 6.5% to 7.9%.

Cracker Barrel pays a dividend of 22 cents, translating to a yield of 1.6% with a payout ratio of 21%. The dividend has grown 11%, on average, in the past three years and 5.8%, on average, over the past five.

The balance sheet stored $25 million of cash and $579 million of debt, equal to a weak quick ratio of 0.1 and an elevated debt-to-equity ratio of 2.6, at quarter's end.

Miller Tabak's Thesis: Cracker Barrel is in a "sweet spot in the value spectrum," according to Miller Tabak, which expects it to gain market share within family dining and steal customers from mid-scale peers as unemployment remains a headwind. It is predicting 2.7% comparable restaurant sales growth in 2011 and 2.3% growth in retail operations. (Cracker Barrel sells memorabilia at stores adjacent to its restaurants).

Debt payment is no longer a concern and Miller Tabak has boosted its forecast of 2011 and 2012 new restaurant openings to 11 and 15, respectively. Most important, Cracker Barrel remains cheap, based on its peer valuation. Here is a closer look:

Trailing P/E: 14 (67% Industry Discount)
Forward P/E: 12 (60% Industry Discount)
Sales Multiple: 0.5 (82% Industry Discount)
Book Value Multiple: 5.6 (4% Industry Discount)
Cash Flow Multiple: 6.9 (54% Industry Discount)

Analyst Ratings: Analysts are bullish on Cracker Barrel. Eight, or 73%, advise purchasing its stock and three recommend holding it. Sidoti & Co. echoes Miller Tabak's $67 target. Stifel Nicolaus has a $65 projection and KeyBank expects a rise to $61. Morgan Keegan offers the lowest target, at $60, implying 11% of upside in the next 12 months.

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