Each weekday, TheStreet.com Ratings compiles a list of the top 10 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, we look at small-cap stocks. These are stocks of companies that have market capitalizations between $50 million and $500 million, and that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors.

In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.

Up first today is

Preferred Bank

(PFBC) - Get Report

, which has 10 full-service branches focused on California's large Chinese-American population. The company's stock has earned a buy rating since December 2005. The stock should outperform most stocks we rate on the basis of its steady EPS growth, positive increases in net income, compelling return on equity and solid stock performance.

The stock is relatively more expensive than its peers. However, Preferred Bank shows no glaring weaknesses, and its strong financial performance justifies its higher price level.

KMG Chemicals

( KMGB), rated a buy since March 2005, makes specialty chemicals for about 135 customers. The company shows impressive EPS growth, a low debt-to-equity ratio, outstanding net income growth and strong stock performance.

These positives outweigh KMG's weak operating cash flow.

EnergySouth

( ENSI), a holding company concentrated on the purchase, distribution, storage and transportation of natural gas in southwest Alabama, has been rated a buy since March 2005. Its strengths include strong net operating cash flow, a reasonable debt-to-equity ratio beneath that of the industry average, and remarkable stock price growth. Its stock is expensive relative to its peers, but given its performance, the higher price is justified.

Though EnergySouth shows a somewhat disappointing return on equity, its overall financial strengths outweigh its weaknesses, and the stock merits a buy rating.

Oyo Geospace

( OYOG) designs, manufactures and sells seismic data equipment, and has had a buy rating since February 2006. The company has several positive qualities, including robust revenue growth, expanding profit margins, solid return on equity and notable operating cash flow increases.

Although no company is without minor weaknesses, Oyo displays no sign that its positive performance will slow.

Medtox Scientific

( MTOX), which provides forensic and clinical laboratory services, has been rated a buy since October 2005. The company has shown impressive stock price appreciation, a notable return on equity and a strong gross profit margin.

Although no company is perfect, there are currently no significant weaknesses that are likely to detract from the generally positive outlook.

Property and casualty insurance provider

Meadowbrook Insurance Group

(MIG)

has been rated a buy since March 2005. The company has demonstrated a pattern of positive EPS growth over the past two years, improved its return on equity and has enjoyed a significant increase in its stock price.

These strengths outweigh the company's low profit margins.

Tessco Technologies

(TESS) - Get Report

is a distributor of wireless products. It has been rated a buy since March 2005. Among the company's strengths include a steady pattern of EPS growth, good cash flow from operations, impressive stock performance and robust revenue growth.

These strengths outweigh the company's low profit margins.

Riverview Bancorp

(RVSB) - Get Report

, the parent company of Vancouver-based Riverview Community Bank, has been rated a buy since March 2005. The company's strengths include its solid stock performance, impressive record of EPS growth and improved return on equity.

Although the company may have some minor weaknesses, they are unlikely to have a significant impact on results.

Cherokee

(CHKE)

markets and licenses the Cherokee, Sideout and Carole Little brands -- as well as related trademarks and other brands it owns or represents -- for family apparel, fashion accessories and footwear, home furnishings and recreational products. It has been rated a buy since March 2005.

The company's strengths include notable return on equity, a largely solid financial position with reasonable debt levels by most measures and expanding profit margins. It is poised for EPS growth in the upcoming year.

These strengths outweigh the company's weak operating cash flow.

Rated a buy since March 2005,

Balchem

(BCPC) - Get Report

develops, manufactures and markets specialty performance ingredients for the food, feed and medical sterilization industries. The company has shown a pattern of EPS growth and reasonable valuation levels. Its strengths outweigh the company's declining stock performance.