Each business day, 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 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 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, 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.
develops, manufactures and markets specialty performance ingredients and products for the food, feed and mechanical sterilization industries. Balchem produces choline products for both human and animal consumption. Choline, a vitamin-B complex, plays a vital role in the metabolism of fat and the building and maintaining of cell structures. Choline deficiency can result in reduced growth and perosis (a disease characterized by a deformity of the leg joint) in poultry and fatty liver, kidney necrosis and general poor health in swine, among other symptoms. In humans, choline is recognized as playing a key role in the structural integrity of cell membranes, the processing of dietary fat, reproductive development, and neural functions such as memory and muscle function. Balchem also produces encapsulated performance ingredients for use throughout the food and animal-health industries in end products such as baked goods, refrigerated and frozen dough, processed meats, seasoning blends and confections. These performance ingredients are used to enhance nutritional fortification and improve shelf life of prepared products.
Our buy rating for Balchem has not changed since June 2003. The company reported record results in net sales and net earnings for the first quarter of fiscal 2008. Balchem achieved net sales of $56.9 million, reflecting a 35% increase from the year-ago quarter. Net earnings increased 35% year over year to $4.6 million. Earnings per share increased 32% to 25 cents from 19 cents in the first quarter of 2007.
Management reported that the integration of several acquisitions made during fiscal 2007 have gone well, and stated that the first-quarter results did not yet reflect the company's full expectations for those acquisitions. Additionally, management noted again that rising raw material costs are expected to remain a challenge for Balchem in the near term. While the company has taken pricing steps to counteract the effects of these increased input costs, the actions taken in the first quarter did not offset all the cost increases, primarily because of timing. Overall, management expects the remainder of fiscal 2008 to continue to bring double-digit increases in sales and earnings. Bear in mind, however, that global economic issues could affect the company's results.
is one of the nation's oldest providers of radioactive, hazardous and industrial waste management services. The company's customers are commercial and government entities, such as nuclear power plants, medical and academic institutions, steel mills, refineries and chemical production facilities. A significant portion of the company's revenue from operating disposal facilities -- those that actively receive and treat waste materials -- comes from discrete, one-time clean-up projects, which may span weeks, months, or years depending on project scope. American Ecology's Non-Operating Disposal Facilities segment consists of facilities that no longer receive waste materials but continue to be monitored and maintained as part of the treatment of previously received waste materials. Other services include waste stabilization, encapsulation and chemical oxidation.
We have rated American Ecology a buy since October 2005. Strengths such as revenue growth, a largely solid financial position, and a notable return on equity influenced this rating. For the first quarter of fiscal 2008, revenue rose 19% year over year. This growth appears to have trickled down to the bottom line, improving earnings per share 19%. In fact, the company has demonstrated a pattern of positive EPS growth over the past two years. A slight improvement in return on equity can be seen as a modest strength for the company. Finally, while total debt increased slightly year over year, it remains at an almost negligible level.
Looking ahead, the company anticipates fiscal 2008 earnings to be in the range of $1.17 to $1.23 per diluted share. This estimate is based on the company's record first-quarter results and its strong outlook for the second quarter. Additionally, we feel that American Ecology's strengths outweigh the fact that the company currently shows weak operating cash flow.
is a science and engineering consulting firm whose multidisciplinary team of scientists, physicians, engineers and business and regulatory consultants brings together more than 70 different technical disciplines to solve complicated issues facing businesses. Its professional staff can perform in-depth scientific research and analysis or very rapid-response evaluations to provide clients with the critical information they need.
Exponent has been rated a buy since November 2001. For the first quarter of fiscal 2008, revenue rose by 15% year over year. Net income for the same period increased 26%, to $6.4 million. Exponent reported that EPS improved 29% to 40 cents in the most recent quarter. The company has demonstrated a pattern of positive EPS growth over the past two years. Return on equity also improved slightly from the year-ago quarter.
Driven by strong earnings growth and other factors, this stock has surged 58% over the past year. We feel that Exponent should continue to climb. The company believes that it remains well positioned to capture new opportunities for growth as it moves further into fiscal 2008. For the full year, management expects to report high single-digit to low double-digit growth in revenue as a result of the company's plans to pursue strategic opportunities. However, Exponent's future results could be negatively impacted by any disruptive changes in both general and industry-specific economic conditions and the effects of tort reform and government regulation of the company's business.
is a provider of health care products used for the screening, detection, treatment, monitoring and tracking of common medical ailments. The company also has products used in newborn metabolic testing. Natus' principal product lines include its ALGO and ABaer screening products for newborn hearing screening, its Echo-Screen OAE device for hearing screening in newborns and hearing monitoring in young children and adults, its Navigator and AuDX products for diagnostic hearing assessment in children and adults, and its neoBLUE LED line of phototherapy devices for the treatment of newborn jaundice. The Ceegraph VISION product line for diagnostic electroencephalograph (EEG) monitoring, the Sleepscan VISION product line for EEG monitoring of sleep disorders, and the Neometrics newborn screening data management systems are also key product lines for the company. The company sells its products in over 80 countries.
Natus has been rated a buy since June 2007. For the first quarter of fiscal 2008, Natus reported a 36% revenue increase year over year. The company also reported that its earnings per share improved from 7 cents a year ago to 11 cents in the most recent quarter. Over the same period, net income rose to $2.63 million from $1.52 million. First-quarter results were led by strong sales of newborn hearing-screening products. Additionally, the company completed its integration of Excel-Tech ahead of schedule, and recently announced an agreement to acquire Sonamed, a manufacturer of hearing-screening products.
Looking ahead, Natus increased its revenue and earnings guidance for fiscal 2008 and now anticipates revenue to range from $161 million to $162 million. Earnings per share are expected to be in the range of 70 cents to 72 cents for the full year, while guidance for the second quarter anticipates EPS in the range of 14 cents to 15 cents. This guidance does not include the potential impact of the Sonamed acquisition, which is expected to close by the end of May 2008. Bear in mind that the stock has surged 35% over the last year and is now trading at a price that is somewhat expensive when compared to the rest of the industry. We do, however, feel that the company does not currently have any significant weaknesses and that its strengths justify the higher stock price levels.
designs, develops and markets high-performance interface integrated circuits and frequency control products used in advanced electronic systems. Interface ICs transfer, route and time electrical signals among a system's microprocessor, memory and various peripherals as well as between interconnected systems. FCPs are electronic components used as time and frequency clocks in electronic products ranging from computers and telecommunications switching equipment to cell phones and televisions. Pericom's interface products increase system bandwidth.
We have rated Pericom a buy since February 2007. The company reported that its earnings for the third quarter of fiscal 2008 surged 58% year over year, bolstered by strong demand. Revenue climbed 36% to $41.18 million in the same period. Net income for the quarter increased to $4.1 million, or 16 cents a share, from $2.6 million, or 10 cents a share, a year ago. The company expanded its Digital Video solutions by launching two new switches that allow next generation computing platforms using dual function graphics ports to be switched between either of the high speed protocols. Pericom also launched three new signal conditioning products and expanded its Timing portfolio.
Looking ahead, management expects revenue for the fourth quarter of fiscal 2008 to be in the range of $42 million to $43.2 million, with gross margin expected to be in the range of 37% to 38%. In addition, the company expects its operating expenses to be between $10.8 million and $11 million. However, weak demand for semiconductors, higher stock option expenses and the highly competitive market could restrict Pericom's future growth.
Our quantitative rating 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.
This article was written by a staff member of TheStreet.com Ratings.