Each weekday, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list, updated daily, is based on data from the close of the previous trading session. Today, small-cap stocks are in the spotlight. These are stocks of companies that have market capitalizations of between $50 million and $500 million that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors.
The stocks also must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
Today begins with
, which provides corporate visual image solutions to the petroleum/convenience-store industry. It has been rated a buy since September 2005. The company's revenue growth outpaces the industry average, and it has no debt to speak of. LSI's net income increased by 56.3% in the fourth quarter of its fiscal 2007 compared with the same quarter one year ago, rising to $6.96 million from $4.45 million. These strengths outweigh the company's low profit margins.
Brokerage and investment advisory services provider
American Physicians Service Group
has been rated a buy since September 2005. The company's strengths include revenue growth, a largely solid financial position with reasonable debt levels by most measures and a stock price that has increased by 9.52% in the 12 months prior to Sept. 27. While EPS has been declining over the past year, TheStreet.com Ratings anticipates that this trend will reverse going forward. These strengths outweigh the company's subpar net income growth.
( AXYS), which makes optical system components, has been rated a buy since August 2005. Axsys recently reported that second-quarter net income increased 47% over a year ago. Sales increased 28% to $49.2 million, driven by strong demand for infrared cameras and lens products. With the threat of terrorism across the world, the need for advanced technology to secure borders is growing. However, only a fraction of more than 150,000 miles of international borders are equipped with the latest surveillance technology. This provides the company with huge business potential.
The buy rating is not risk-free. Axsys' success is largely dependent on its ability to anticipate and respond rapidly to changing technological developments in the industry. Moreover, a reduction or delay in the purchase of precision optical solutions by the U.S. government could have an impact on financial performance.
provides clinical laboratory testing services to health care providers primarily in the greater New York metro area. It has been rated a buy since September 2005. The company's third-quarter revenue increased 34.5% from the same period last year, due to a 22% increase in patient count and an 11% rise in net revenue per patient. The fast-growing esoteric testing business, which carries higher margins than average, may aid the company's revenue and profit growth. New technologies and new methodologies are also expected to contribute significantly. The company also plans to expand its laboratory operations through acquisitions, aggressive marketing and diversification into related medical fields.
Risks remain. Expansion of core laboratory and other products has placed a major strain on company resources, and a declining gross margin and deteriorating return on equity may hamper the stock's appeal.
Property and casualty insurance firm
Hallmark Financial Services
has been rated a buy since December 2006. The company's revenue growth of 45.7% in the second quarter compared with the same period last year exceeded the industry average, while its debt-to-equity ratio of 0.27 is below that of the industry average. Hallmark's net income swung to a profit of $8.82 million from a loss of $2.84 million over the same time frame.
The company's stock price has appreciated by 35.66% in the 12 months since Sept. 28. And while any stock can fall in a major bear market, it should continue to move higher. These strengths outweigh the company's low profit margins.