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 Institutional Brokers' Estimate System. The stocks are ranked in the order of their potential to appreciate.

Up first this week is Cherokee ( CHKE), which has been rated a buy since December 2004. Cherokee markets and licenses the trademarks and brands it owns or represents for clothes, home furnishings and recreational products.

The company's strengths include notable return on equity, revenue growth, a largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock performance. TheStreet.com Ratings feels these strengths outweigh the fact that the company shows weak operating cash flow.


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 it has been rated buy since December 2004. Rentrak is in a largely solid financial position with reasonable debt levels by most measures, with expanding profit margins. 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 when compared with the industry average of 20.1%.


Dynamex ( DDMX) provides same-day delivery and logistics services in the U.S. and Canada. It has been rated a 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 earnings-per-share growth.

TheStreet.com Ratings feels 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.


Riverview Bancorp ( RVSB), the parent company of Vancouver-based Riverview Community Bank, has been rated a 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 feel they are unlikely to have a significant impact on results.


Atlantic Tele-Network ( ATNI), which provides wireless and wireline telecommunications services in the Caribbean and North America, has been rated a 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 under-served 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 its exclusive right 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.


Multi Color ( LABL) supplies decorative labels and packaging services to consumer product companies, retailers and container manufacturers in the U.S., Canada, Mexico, Central America and South America. It has been rated a buy since February 2006.

The company's strengths include its solid stock price performance, an impressive record of EPS growth, compelling growth in net income, revenue growth and reasonable valuation levels. TheStreet.com Ratings feels these strengths outweigh the fact that the company shows 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 December 2004. Its strengths include a net income growth of 4.32% in the fourth quarter of fiscal year 2006 compared with the same period the previous year, and a strong debt-to-equity ratio of 0.74, lower than the industry average. Its stock price surged 46.94% in 2006, making it expensive relative to its peers, though EPS remained stagnant in the year's fourth quarter compared with the year before.

Though EnergySouth shows a weak operating cash flow, its solid financial position, acceptable debt levels and a notable return on equity outweigh its weaknesses and merit a buy rating.


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 a buy since February 2005.

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


Buffalo Wild Wings ( BWLD), which owns and operates or franchises Buffalo Wild Wings Bar & Grill restaurants, has been rated a buy since November 2006.

The company's strengths include its robust revenue growth, largely solid financial position with reasonable debt levels, solid stock price performance, an impressive record of EPS growth and compelling growth in net income.

TheStreet.com Ratings feels these strengths outweigh the fact that the company shows low profit margins. Buffalo Wild Wings' gross profit margin for the third quarter of 2006 was essentially unchanged from the year-earlier period. However, the company has grown sales and net income significantly, outpacing the average growth rate of its competitors.


Grillmaster Famous Dave's of America ( DAVE) serves up barbecue in 41 company-owned units and 104 franchise-operated units in 35 states. It has earned a buy rating since March 2006. The company displayed an improved return on equity in the third quarter compared with the same period the previous year, revenue growth of 17.3% and EPS growth of 36.4% during the quarter, continuing a two-year pattern of positive EPS growth.

Famous Dave's is also far exceeding the industry average cash flow growth rate of -35.97%, posting a net operating cash flow of $5.15 million in the third quarter of 2006, an increase of 35.65% from the same period the previous year.

The company's recent successes have caused its stock to ascend to a price that is relatively expensive among its industry peers. But despite its low profit margins, its strengths justify its price and is likely to continue to appreciate.