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.

The top 10 rankings are based on our ratings, which assess risk-adjusted returns as well as other criteria specific to the type of stock.

We update the lists at the end of the business day on the basis of information available at the close of the previous trading session. Beginning this week, we are publishing a daily article that takes a closer look at the ratings of the stocks on one of the lists.

Today we'll look at small-cap stocks. These are stocks with a market capitalization of less than $500 million that rate near the top of TheStreet.com Ratings' coverage universe. In addition, the stocks must be followed by at least one financial analyst who posts earnings estimates on IBES. The stocks are ranked in the order of their potential to appreciate.

Rentrak ( RENT) collects, processes, analyzes and presents rental and sales data on DVDs, videocassettes and video games leased/licensed to home video specialty stores. The company serves clients in the media,entertainment, retail, advertising and manufacturing industries, and has been rated buy since December 2004. Rentrak is in a largely solid financial position with reasonable debt levels by most measures, with expanding profitmargins. We believe these strengths outweigh the fact that the company shows weak operating cash flow.

The return on equity has improved slightly when compared with the fiscal second quarter one year prior. This can be construed as a modest strength in the organization. Powered by its strong earnings growth of 70% and other important driving factors, this stock has surged by 74.35% over the past year, as of Jan. 3, outperforming the rise in the S&P 500 index during the same period. Despite its growing revenue, the company underperformed as compared with the industry average of 20.1%.


Atlantic Tele-Network ( ATNI), which provides wireless and wireline telecommunications services in the Caribbean and North America, has been rated buy since December 2004.

TheStreet.com Ratings' positive outlook on the stock is primarily influenced by the company's acquisition-led growth strategy and its focus on underserved markets. Atlantic Tele-Network's financial performance in the third quarter of its fiscal year 2006 was also encouraging.

The principal risks to our rating include termination of the company's exclusive rights to provide wireline local and long-distance telephone services in Guyana; any decline in volume of international long-distance calls; any adverse regularity developments; and increasing competition.

Donegal ( DGICA) provides property and casualty insurance, primarily in 18 Mid-Atlantic, Midwestern and Southeastern states. The company's product offerings consist of automobile, homeowners', commercial multiperil, workers' compensation and other lines of insurance. It has been rated buy since December 2004.

Donegal's strengths include its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, notable return on equity, and attractive valuation levels. TheStreet.com Ratings believes these strengths outweigh the fact that the company shows low profit margins.


Dynamex ( DDMX) provides same-day delivery and logistics services in the U.S. and Canada. It has been rated buy since December 2004.

The company's strengths include its notable return on equity, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and impressive record of EPS growth.

TheStreet.com Ratings believes these strengths outweigh the fact that the company shows low profit margins. Dynamex's gross profit margin for the first quarter of its fiscal year 2007 was essentially unchanged over the year-earlier period, but the company managed to grow both sales and net income at a faster pace than the average competitor in its industry.


Universal Electronics ( UEIC) develops software and builds wireless control devices and chips, principally for home entertainment equipment and the subscription broadcasting market. It has been rated buy since February 2005.

The company's strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of EPS growth, solid stock price performance and notable return on equity. TheStreet.com Ratings believes these strengths outweigh the fact that the company shows weak operating cash flow.

Riverview Bancorp ( RVSB), the parent company of Vancouver, Wash.-based Riverview Community Bank, has been rated buy since December 2004.

The company's strengths include its notable return on equity, solid stock-price performance, impressive record of earnings-per-share growth, robust revenue growth and expanding profit margins. Although the company may harbor some minor weaknesses, we belive they are unlikely to have a significant impact on results.


MidSouth Bancorp ( MSL) is as a Louisiana bank-holding company that owns two subsidiaries: MidSouth Bank and Lamar Bank. MidSouth has been rated buy since December 2004. The return on equity has improved slightly when compared with the third quarter one year prior. Despite its growing revenue, the company underperformed as compared with the industry average of 31.5%. Since the third quarter a year ago, revenue rose by 30.8%, which appears to have helped boost earnings per share.

Powered by its strong earnings growth of 50% and other important driving factors, this stock has surged by 44.31% over the past year, outperforming the rise in the S&P 500 during the same period. We believe that the stock's sharp appreciation over the last year has driven it to a price level that is now somewhat expensive compared with the rest of its industry. The other strengths this company shows, however, justify the higher price levels.


Heritage Commerce ( HTBK), a California bank-holding company, has been rated buy since December 2004. The company's strengths include its notable return on equity, revenue growth, growth in earnings per share, solid stock-price performance and expanding profit margins.

TheStreet.com Ratings believes these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared with such things as earnings and book value. Heritage's gross profit margin for the third quarter of its fiscal year 2006 was very high at 72.40%, but was down from the year-earlier period. Nevertheless, the company's net profit margin of 20.90% for the quarter compares favorably to the industry average.

Dover Downs Gaming ( DDE) is a gaming and entertainment company that owns Dover Downs Slots, a 91,000-square-foot video-slots casino complex; the Dover Downs Hotel and Conference Center; and the Dover Downs Raceway in Dover, Del. The company has had a buy rating since December 2004, driven by multiple strengths, which we believe should have a greater impact than any weaknesses and should give investors a better performance opportunity than most stocks we cover. The company has good cash flow from operations, solid stock-price performance, and an impressive record of EPS growth and revenue growth. We believe these strengths outweigh the fact that the company shows low profit margins.

The company's return on equity for the third quarter of 2006 greatly increased when compared with its ROE from the same quarter the previous year. This is a sign of significant strength within the corporation. Net operating cash flow has increased to $12.33 million or 25.27% when compared with the same quarter last year. In addition, Dover Downs Gaming also has vastly surpassed the industry average cash flow-growth rate of -35.97%. We believe Dover should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.


West Coast Bancorp
( WCBO) owns and operates the West Coast Bank, of Lake Oswego, Ore. West Coast Bank conducts business through 52 branches located in western Oregon and southwestern Washington. The company has been rated buy since December 2004 based on robust revenue growth, growth in earnings per share, notable return on equity, solid stock-price performance and expanding profit margins. We believe these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price.

West Coast's revenue growth has slightly outpaced the industry average of 31.5% for the third quarter of 2006. Since the third quarter one year prior, revenue rose by 36.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. The gross profit margin for the company is rather high; currently it is at 69%. Despite the high profit margin, it has decreased significantly from the same period last year. Also, despite the mixed results of the gross profit margin, its net profit margin of 16.4% compares favorably to the industry average.

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