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Each business day, we compile a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- 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 $50 million to $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 must also 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 or 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.
is a provider of IT services and solutions to U.S. federal government agencies. The company focuses on designing, implementing, maintaining, and upgrading IT systems and networks. NCI has been rated a
since February 2008 based on its healthy growth in revenue and net income, solid stock price performance, impressive record of EPS growth, and sound return on equity.
For the fourth quarter of fiscal 2008, the company reported that its revenue rose 15.2% year over year, slightly outpacing the industry average of 13.5%. This growth appears to have helped boost EPS, which rose 44% when compared to the same quarter last year. The company's EPS growth is a continuation of a pattern of positive EPS growth over the past two years. Net income also improved, increasing 48.2% from $3.3 million to $5 million. Return on equity improved slightly when compared to a year ago, and can therefore be considered a modest strength for NCI. In addition, NCI's stock price has surged 89.7% over the past year, due to strong earnings growth and other key factors.
Management stated that it felt NCI had great results for fiscal 2008, remaining on track with its strategic plan. The company expects further growth in fiscal 2009 due to new business won in 2008, such as the $173 million ITES-2S task order with the Army National Guard and Air National Guard awarded to NCI in December. Looking ahead, the company expects first quarter 2009 EPS in the range of 31 cents to 33 cents, on revenue of $102 million to $107 million. Although the company shows weak operating cash flow, we believe that the strengths detailed above outweigh any potential weaknesses at this time.
processes and markets culinary, snack, in-shell, and ingredient nuts, which are primarily sold through two main product lines: Diamond of California and Emerald Nuts. We have rated the company a
since July 2008 on the basis of the company's impressive record of EPS growth, increases in revenue and net income, and largely solid financial position.
For the second quarter of fiscal 2009, the company reported revenue growth that exceeded the industry average of 0.8%. Diamond Foods' revenue rose 12.5% year-over-year, helping boost EPS from 17 cents a year ago to 37 cents in the most recent quarter. We feel that the company's trend of positive EPS growth should continue in the future. Diamond's net income also improved significantly in the second quarter, increasing 129.8% from $2.7 million to $6.1 million. Net operating cash flow improved slightly, increasing 6.3% to $67.7 million. Additionally, factors such as Diamond's strong earnings growth of 117.6% helped drive the company's stock price higher by 44.3% over the past year.
The company announced that its second quarter earnings were a record for Diamond Foods, and was pleased with the success of its business strategy. On the basis of the second quarter results, the company increased its full-year earnings guidance, announcing that it now expects net sales of $535 million to $565 million, and EPS between $1.27 and $1.34 per share. The new EPS range represents an increase of 2 cents per share over previous guidance. While we see the company's low profit margins as a potential cause of concern, we currently believe that the strengths detailed above outweigh any potential weakness at this time. In addition, we feel that those strengths justify the higher price levels to which the stock has been driven over the past year.
American Physicians Service Group
is an insurance and financial services firm. Its subsidiaries and affiliates provide medical malpractice insurance, as well as brokerage and investment services to institutions and high net worth individuals. American Physicians Service has been rated a
since May 2003. This rating is supported by several positive factors, including its largely solid financial position and good cash flow from operations.
For the fourth quarter of fiscal 2008, American Physicians Service Group reported a decline in revenue, which in turn impacted EPS. Despite the steep drop in EPS, our model anticipates a reversal of the company's negative EPS trend in the coming year. Net operating cash flow increased significantly when compared to the same quarter last year, rising 241.7% to $3.5 million. In addition, the company has a very low debt-to-equity ratio of 0.1, which implies that its debt has been successfully managed.
Management pointed out that 2008 was American Physician Service Group's first full year of operation as a fully integrated insurance company, as API was acquired in 2007. While acknowledging that the company did not escape the worldwide economic difficulties, the company was pleased with its full-year performance, particularly in terms of earnings, share price, and return on equity. Although the company shows low profit margins, we feel that the strengths detailed above outweigh any potential weakness at this time.
American Physicians Capital
( ACAP) is an insurance holding company. Its primary focus is medical professional liability insurance, which it writes through its subsidiary, American Physicians Assurance Corporation. Our
for American Physicians has not changed since November 2004 and is based on the company's largely solid financial rating, strong cash flow from operations, expanding profit margins, solid stock price performance, and notable return on equity.
For the fourth quarter of fiscal 2008, the company's net operating cash flow increased significantly, rising 138.8% year over year to $15.7 million. A low debt-to-equity ratio of 0.1 implies that the company has successfully managed its debt. American Physicians Capital has a gross profit margin of 40.8%, which we consider strong, while its net profit margin of 29.3% significantly outperformed against the industry. Although the company's revenue dropped 9.7% when compared to the same quarter of last year, the company's bottom-line was not hurt, as evidenced by increasing EPS. EPS jumped from $1.19 to $1.24 in the fourth quarter.
Looking ahead, management stated that it expects the company to exceed EPS of $4.25 in fiscal 2009 if current trends in frequency, severity, and pricing remain stable in the company's book of business. Although the company has had somewhat weak EPS growth recently, we feel that the strengths detailed above outweigh any potential weaknesses at this time.
Lincoln Educational Services
is a for-profit provider of career-oriented, post-secondary education, offering degree and diploma programs in four areas of study: automotive technology, allied health, skilled trades, and business and information technology. We have rated the stock a
since October 2008 because of the company's revenue growth, expanding margins, and improving bottom-line.
For the fourth quarter of fiscal 2008, Lincoln achieved record revenue, which soared 18.9% year-over-year. This growth was fueled by the acquisition of Briarwood College and an increase in average student population. Revenue growth appears to have helped boost EPS, which improved 32.4% when compared to the same quarter a year ago. Net income also increased, rising 32.7% from $9.6 million to $12.8 million. Gross profit margin improved 178 basis points to 67.5%, while operating margin expanded 95 basis points to 19.8%. Lincoln's cash and cash equivalents more than quadrupled to $15.2 million, improving the company's cash position. In addition, the company has a low debt-to-equity ratio of 0.1, indicating that it has been successful at managing its debt.
Management was pleased with both the fourth quarter and year-end results for fiscal 2008. Looking ahead to the first quarter of fiscal 2009, Lincoln anticipates EPS in the range of 5 cents to 7 cents on revenue of $112 million to $114 million. The company does face challenges from rising expenses, and any inability to attract new students could restrict the company's financials going forward. Overall, however, we do not see any significant weaknesses that are likely to detract from this company's generally positive outlook.
TheStreet.com Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!Our quantitative rating, which can be viewed for any stock through our stock screener stock rating screener, is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.