Each weekday, 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, updated daily, 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.


Consolidated Water ( CWCO - Get Report), which operates seawater desalination plants and water distribution systems, has been rated a buy since December. The company has a largely solid financial position with reasonable debt levels and good cash flow from operations. Its first-quarter revenue rose 37.8% on the year, and its debt-to-equity ratio of 0.22 is below that of the industry average. This suggests very successful management of debt levels.

The company's strong revenue growth has contributed to a steady track record of EPS growth over the past two years. This has helped Consolidated Water's stock price appreciate by 28.46% in the year prior to July 13. While this price level is somewhat expensive compared with the rest of its industry, the company's strengths justify the higher price level. Its positives also outweigh a somewhat disappointing return on equity.


American Software ( AMSWA - Get Report), which develops software and services for enterprise management and collaborative supply chains, has been rated a buy since December 2005. Strong EPS growth over the past year has helped the company's stock price appreciate faster than the S&P 500.

Baring a major bear market, the stock should continue to move higher. The company has no debt to speak of, and maintains a quick ratio that demonstrates the ability to cover short-term cash needs. While American Software may harbor some minor weaknesses, they are unlikely to have a significant impact on results.


Lindsay ( LNN - Get Report), which makes irrigation products, has been rated a buy since March. The company has seen robust growth in revenue and earnings per share. These strengths outweigh the fact that the company shows low profit margins. In June, Lindsay said third-quarter profit climbed about 17% to $7.5 million, while revenue jumped 24% to $93.2 million, spurred by higher prices and a demand for irrigation equipment in the U.S., despite an easing of drought conditions.


Electronic-components maker Spectrum Control ( SPEC) has been rated buy since August 2005. The company has reported robust revenue growth, coming in higher than the industry average of 11.5%. Spectrum Control has a solid financial position with reasonable debt levels, solid stock price performance, an impressive record of earnings-per-share growth and compelling growth in net income. These strengths outweigh the company's low profit margins.


National Research which provides ongoing survey-based performance measurement for the health care industry, has been rated a buy since November. The company has shown impressive growth in revenue, earnings per share, and net income. Revenue has grown over the year-ago quarter and came in higher than the industry average. These strengths outweigh the fact that the company has had somewhat disappointing return on equity.