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.

This list, updated daily, is based on data from the close of the previous trading session. Today, we look at small-cap stocks. 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.

In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.

Up first today is Preferred Bank ( PFBC), which has 10 full-service branches focused on California's Chinese-American population. The company's stock has earned a buy rating since December 2005. Preferred Bank should outperform most stocks we rate on the basis of its steady EPS growth, positive increases in net income, compelling return on equity and solid stock performance.

The stock is relatively more expensive than its peers. However, Preferred Bank shows no glaring weaknesses, and its strong financial performance justifies its higher price level.


EnergySouth ( ENSI) is a holding company concentrated on the purchase, distribution, storage and transportation of natural gas in southwest Alabama. The company's stock has been rated a buy since March 2005. Its strengths include strong net operating cash flow, a debt-to-equity ratio below the industry average and remarkable stock price growth. Although its stock price is expensive relative to its peers, we believe the higher price is justified.

Though EnergySouth shows a disappointing return on equity, its overall financial strengths outweigh its weaknesses, and the stock merits a buy rating.


Riverview Bancorp ( RVSB), the parent company of Vancouver-based Riverview Community Bank, has been rated a buy since March 2005. The company's strengths include its solid stock performance, impressive record of EPS growth and expanding profit margins.

Although the company may harbor some minor weaknesses, they are unlikely to hurt results.


Layne Christensen ( LAYN) provides drilling services and products to four principal markets: water resources, mineral exploration, geoconstruction and energy. It has carried a buy rating since January 2005. The company has enjoyed strong net income growth, compelling stock performance, solid revenue growth and a sharp increase in EPS. Layne's strengths outweigh the company's low profit margins.


Oyo Geospace ( OYOG) designs, manufactures and sells seismic data equipment, and it has had a buy rating since February 2006. The company has several positive qualities, including robust revenue growth, expanding profit margins, solid return on equity and notable operating cash flow.

Although no company is without its minor weaknesses, Oyo displays no sign that its positive performance will slow.


Tessco Technologies ( TESS) is a distributor of wireless products. It has been rated a buy since March 2005. Among the company's strengths are notable return on equity, good cash flow from operations, impressive stock performance and robust revenue growth.

These strengths outweigh the company's low profit margins and give Tessco considerable upside potential.


Dynamex ( DDMX) provides same-day delivery and logistics services in the U.S. and Canada. It has been rated a buy since March 2005.

The company's revenue growth has slightly outpaced the industry average, and it appears to have trickled down to the company's bottom line, improving the earnings per share. Dynamex's s debt-to-equity ratio is very low at 0.05, implying that there has been very successful management of debt levels.

TheStreet.com Ratings feels these strengths outweigh the fact that the company shows low profit margins.


KMG Chemicals ( KMGB), rated a buy since March 2005, makes specialty chemicals for about 135 customers. The company shows impressive EPS growth, a low debt-to-equity ratio, outstanding net income growth and strong stock price performance.

These positives outweigh KMG's weak operating cash flow.


Buffalo Wild Wings ( BWLD), which owns, operates and franchises Buffalo Wild Wings Bar and 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, good stock performance, an impressive record of EPS growth and compelling growth in net income.

These strengths outweigh the company's low profit margins.


Health care services provider HMS Holdings ( HMSY) has been rated a buy since January 2005. The company's strengths include solid revenue growth, a low debt-to-equity ratio and impressive stock performance.

These strengths outweigh HMS's subpar net income growth.

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