) -- Small-cap stocks allow investors to target little-known niches with strong growth potential, such as radiation monitoring.

Glenwood, Ill.-based



makes equipment that analyzes occupational radiation exposure from nuclear power, X-ray machines and medical devices. As unexciting as that sounds, investors would be wise to consider this unglamorous company and its 25% profit margin instead of trendier names.

The stock has gained 6.7% in the past year, trailing the 19% advance of the

Russell 2000 Index

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, a gauge of small-cap companies. However, the shares have increased 3.5% annually, on average, during the past three years, while the benchmark has dropped 7.4%.

A return on equity of 33% and dividend yield of 3.47% add to Landauer's appeal. Landauer's managers plan to bring the company's testing equipment and services abroad, which could eventually lead to bigger profits.

More than 90% of Landauer's revenue comes from domestic and European operations. Executives have said in regulatory filings that they intend to push into other regions of the world and diversify the company's products through partnerships and acquisitions.

As the influence of China and India grow, the need for technical products, such as Landauer's radiation monitoring equipment, will also increase. Emerging nations offer an easy path for Landauer to increase sales in unsaturated markets.

Landauer has no debt, which helps the company realize big margins. The $36 million of cash on its balance sheet makes the company an extremely safe investment. The company could easily put cash toward international development or take on debt to fund its expansion efforts.

Growing demand for alternative energy will spur construction of nuclear reactors, boosting the market for radiation testing. While domestic nuclear expansion might generate modest growth, international development could dramatically increase the company's profits.

Landauer isn't known for flashy innovations or fast growth, but it could make a stable investment with a fat dividend. We rate the stock "buy."

-- Reported by David MacDougall in Boston.

Prior to joining Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.