Each business day, 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 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.

Top 5 Small-Cap Stocks

Cam Commerce Solutions ( CADA), which engages in the design, development, marketing, installation and servicing of integrated retailing and payment processing for brick-and-mortar and e-commerce businesses, has been rated a buy since December 2005.

The company has demonstrated a pattern of positive EPS growth over the past two years, and this trend is expected to continue. Fourth-quarter revenue grew by 31% over a year ago to $9.2 million. Earnings more than doubled to $1.6 million or 38 cents a share.

Powered by the strong earnings growth and other important driving factors, this stock has gone up 62.7% in the 12 months prior to Dec. 14. While any stock can fall in a major bear market, in almost any other environment, Cam Commerce should continue to move higher. Although the company may harbor some minor weaknesses, they are unlikely to have a significant impact on results.

Multi-Color Corp ( LABL) supplies decorative label solutions and packaging services to consumer product and food and beverage companies. It has been rated a buy since February 2006. The company's fiscal second-quarter revenue grew 6.19% compared with the same period last year, outpacing the industry average of 0.7%.

Multi-Color also has no debt to speak of, and a quick ratio of 1.52, which demonstrates its ability to cover short-term liquidity needs. Its stock price has gone up by 8.36% in the 12 months prior to Dec. 14, and while even the best stocks can fall in an overall down market, in any other environment Multi-Color's stock still has good upside potential. These strengths outweigh the company's somewhat disappointing return on equity.

Axsys Technologies ( AXYS), which makes optical system components, has been rated a buy since November 2005. Robust demand for infrared camera and lens products and contributions from the acquisition of Cineflec drove third-quarter revenue growth of 34.4% to $45.22 million compared with the same period last year.

Axsys' continued investment in capital equipment and its focus on research and development could enhance production capacity and enable it to respond rapidly to changing technological developments in the industry. The buy rating is not risk-free.

Any significant reduction or delay in the purchase of precision optical solutions by the U.S. government could have an impact on financial performance, as the company derives a significant portion of revenue from this source.

Universal Electronics ( UEIC), which makes products for home-entertainment systems, has been rated buy since December 2005. The company has seen robust revenue and a solid stock price performance. Third-quarter net sales totaled $69 million, up from $59.6 million a year ago. Universal Electronics earned $4.9 million, or 32 cents a share, compared with $3.5 million, or 25 cents a share, a year ago.

Powered by strong earnings growth and other important driving factors, this stock has surged by 65.01% in the 12 months prior to Dec. 17, and it should continue to move higher even though it has already enjoyed a very nice gain in the past year. Although no company is perfect, currently there do not appear to be any significant weaknesses that are likely to detract from the generally positive outlook.

Pericom Semiconductor ( PSEM), which makes integrated circuits and frequency-control products, has been rated a buy since February on the basis of growth in the company's revenue, net income and operating cash flow over the last quarter and fiscal year. Also, Pericom has a healthy cash balance, an improved return on equity and minimal long-term debt.

Fiscal-year first-quarter net profit surged 139% over the year-earlier period to $3.9 million, or 15 cents a share, bolstered by strong demand for its products. Sales climbed 24.5% to $38.5 million. Operating expenses edged up 1.9% to $9.92 million from $9.74 million as a result of higher selling, general and administrative expenses and stock-based compensation costs. Finally, higher interest and other income, which advanced to $1.37 million, also helped the net income increase.

During the quarter, Pericom expanded its digital video product portfolio by introducing a dual mode DisplayPort to DVI/HDMI Bridge. The company also launched two new HDMI switches under the same segment. To meet its target for the share-repurchase program, Pericom repurchased 454,000 shares of its stock during the quarter at an average price of $10.93 for a total of $5 million. On the downside, stiff competition and a weaker gross margin could negatively affect earnings.

Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could impact the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.

If you liked this article you might like

What Is Common Stock and What Is Preferred Stock? Stock Types and Their Differences Explained

What Is Common Stock and What Is Preferred Stock? Stock Types and Their Differences Explained

10 Dividend Stocks for '30-Year' Investors

10 Dividend Stocks for '30-Year' Investors

10 Dividend Stocks for '30-Year' Investors

10 Dividend Stocks for '30-Year' Investors

10 Buy-Rated Dividend Stocks to Buy Today

10 Buy-Rated Dividend Stocks to Buy Today

Top 5 Fast-Growth Stocks: June 1

Top 5 Fast-Growth Stocks: June 1