Top Small-Cap Value Stocks

The Hidden Values Alert portfolio on Stockpickr keeps track of stocks with market caps less than $3 billion that have high return on equity, low debt and consistent earnings and revenue. In other words: good, cheap, small-cap companies.

The portfolio currently includes 15 stocks and commentary, and we've featured the commentary on two of them below, K-Swiss(KSWS Quote) and Landstar System(LSTR Quote)

K-Swiss: Sensible Shoes

KSWS has a very healthy balance sheet with $197 million in cash and no debt. The company's net profit margin over the past five years is 13%, which is almost double the industry average. Management has done an outstanding job, as return on equity over the past five years averages more than 29% per annum. KSWS has been expanding in the international markets, where growth has been strong. The company recently formed a distribution relationship in Japan that should fuel its Asian business.

KSWS is a good company and a price of $29 or less per share represents a very good value. If KSWS can grow earnings at only 15% per annum (a margin of safety that is 65% lower than its past-five-year EPS growth rate of 43% per annum) and maintain a P/E of 13 (a margin of safety that is 7% lower than the current P/E of 14), the stock will reward investors handsomely over the next five years."

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