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.

CAM Commerce Solutions ( CADA) develops a variety of software, hardware and other technical systems for retailers. Our buy rating, in place since February 2006, is based on positive investment measures including strong growth in revenue and net income, as well as a solid financial position and impressive stock performance.

This stock has surged 64% over the past year. Revenues rose by 37% year over year in the first quarter of 2008. CAM has no debt to speak of, giving it a debt-to-equity ratio of zero, which we consider a favorable sign. Net income increased 75% from the year-ago period.

Finally, the company has demonstrated an impressive pattern of positive earnings-per-share growth over the past two years. EPS grew 70% in the first quarter of 2008. Looking forward, we feel that this trend should continue.

Energysouth ( ENSI) is a holding company in the gas utilities sector. Through its subsidiaries Mobile Gas Service and Southern Gas Transmission, the company distributes natural gas to residential, commercial, and industrial customers in southwest Alabama. The company also provides underground natural gas storage services and transportation services through Bay Gas Storage Company.

Energysouth has been rated buy since February 2006. Its solid stock price performance is its primary strength. Shares have jumped 49% in the past year. Although the sharp appreciation has driven the stock to a level that is expensive compared with its peers, we feel that the price is still justified at this time.

Many of the company's financials were down in the most recent quarter, but Energysouth has historically been a very steady natural gas stock. According to management, the decrease in earnings was due primarily to increased operating expenses incurred as a result of continuing expansion of midstream operations. Increased revenues from short-term storage agreements and a decrease in net interest expense partially offset this cost. The Board of Directors declared a quarterly dividend on common stock of a quarter per share.

Axsys Technologies ( AXYS) designs and manufactures precision optical solutions for use by the U.S. government and high-performance commercial markets in aerospace, defense, and other applications. Axsys also distributes precision ball bearings. The company's corporate offices are located in Connecticut, and there are design and manufacturing facilities in a number of other states.

We have rated Axsys buy since November 2005. In the third quarter of 2007, the company recorded strong financial performance. Demand for infrared camera and lens products increased revenues 34% year over year to $45 million. In addition, significant margin expansion and a lower effective tax rate led to a 54% increase in its bottom line to $4.1 million. Furthermore, a continued focus on core business growth through acquisition, as well as measures to increase production and improve profitability, could benefit the company in the future. During the last year, Axsys acquired Cineflec in a move that offers new opportunities in the motion-picture and news-gathering industries. In addition, the company's 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.

Management expects to generate $168 million to $171 million in revenue for fiscal 2007, up 7.5% to 9.4% from fiscal 2006. They also anticipate earnings of $1.24 to $1.26 per diluted share from continuing operations for 2007. However, any significant reduction or delay in purchase of the company's products by the U.S. government could have an adverse effect on Axsys' financial performance, as the company derives a significant portion of its revenue from this source.

Exactech ( EXAC) develops, markets, distributes, and sells orthopedic implant devices, related surgical instrumentation and biologic materials to hospitals and physicians in the U.S. and 27 other countries. The company makes knee systems and other joint replacements. Exactech's revenues derive primarily from sales of its knee and hip replacements. However, revenues from worldwide distribution of biologic materials have increased as a percentage of the company's total sales.

Exactech has been rated buy since March 2007, primarily due to the company's strong financial performance, higher guidance and a favorable industry trend. In the third quarter of 2007, net sales increased 23% year over year to $30 million, largely due to the success of new products and continued growth from existing devices. Exactech performed well in both domestic and international markets on the revenue front; the company reported a 24% increase in revenue from the domestic market and a 21% increase in revenue from international markets. Management raised its fiscal 2007 guidance and now expects revenue between $120.5 million and $122.5 million, with EPS in the range of 78 cents to 79 cents a share.

We expect Exactech to benefit from continued innovation and expansion. The company remains focused on improving its existing line of business, and it awaits approval on several new products in both the U.S. and overseas markets. However, the company is highly exposed to foreign exchange risks with its increasing share of global business. Stiff government regulation could negatively impact product approvals and therefore operating results.

Key Technology ( KTEC) designs, manufactures, sells and services process automation systems that integrate electro-optical inspection and sorting, specialized conveying, and product preparation equipment. Automated inspection systems detect and eliminate defects, most often during the processing of raw and semi-finished products.

Key has been rated buy since February 2007. The company's strengths include robust revenue growth, a solid financial position and net income growth. For the fourth quarter of 2007, revenues rose 31% year over year. Net income increased 495% to $2.4 million from a deficit of $580,000. Key currently has a debt-to-equity ratio of zero.

The recent surge in commodity costs is a challenge to the machinery industry. This could affect Key Technology's results in the future.

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 affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.

This article was written by a staff member of TheStreet.com Ratings.

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