Rampant market volatility has knocked several tech stocks well off their highs. While the vast majority of investors are focusing on the big names, such as the so-called "Four Horsemen" -- Google, Research In Motion, Apple and Amazon.com -- we believe there is considerably more upside potential in high-quality small- and mid-cap names.

A look at this year's best-performing stocks includes little guys such as Walter Industries ( WLT) and Alpha Natural Resources ( ANR), rather than huge multinationals such as Exxon Mobil ( XOM - Get Report), and we don't see any reason for that to change in the near future.

As an equity research analyst, I specialize in stocks that are primed for growth but are not well known as of yet. This is what I do every day for TheStreet.com Breakout Stocks newsletter. ( Click here for a free trial to the service.)

One stock that I've come across is Data Domain ( DDUP), which I highlighted Tuesday for my subscribers but I want to offer my analysis to TheStreet.com's readers as well.

Data Domain offers storage hardware and solutions to more than 1,500 companies across the globe. Data Domain's applications allow enterprises to securely and efficiently back up their data, replacing older forms of backup -- particularly tape-based systems. The company's specialty is its deduplication technology, a fancy way of saying that its systems eliminate redundant data and files as they're stored, which dramatically increases efficiency.

Data Domain went public in June 2007, closing its first day of trading at $23 a share, only to climb as high as $41.14 last October. Since then, despite a lack of negative news, Data Domain has sold off more than 50% to a recent quote of $20.03. We attribute this weakness primarily to the general selloff over the past few months in momentum stocks, which hit small- and mid-caps especially hard.

With shares of Data Domain hovering around $20 now, it is beginning to get interesting to us. Despite a mixed outlook for enterprise spending, as evidenced by weak first-quarter guidance at some major tech companies, Data Domain has seen demand for its offerings skyrocket.

In the fourth quarter of 2007, the company's revenue jumped 151% year over year and 40% sequentially. In addition, Data Domain swung from a loss of 32 cents a share in the fourth quarter of 2006 to break-even results in the fourth quarter of 2007.

Plus, the company offered stellar first-quarter guidance, expecting first-quarter revenue of $46 million to $48 million, implying 127% year-over-year growth. With consensus estimates right in the middle of this range, we believe Data Domain is poised to deliver an upside surprise.

The replacement of tape backup systems by disk-based systems provides Data Domain with a favorable long-term growth outlook, given that disk-based systems make up only a tiny part of the market. As an added bonus, the company said during its fourth-quarter conference call that it has not seen any impact from the slowing economy, and that its win rate when pursuing new customers is increasing.

What's more, Data Domain's average revenue per customer is on the rise. We believe this is evidence of the company's technological edge. Readers should also note that unlike many smaller-tech companies such as Limelight Networks ( LLWN) and Rackable Systems ( RACK), Data Domain has a fairly diverse customer base, with no single industry or customer accounting for more than 10% of revenue.

The average target price of analysts on Data Domain's shares is $34, with a range of $27.50 to $42, according to Capital IQ. We're a bit more conservative than these analysts, believing a $25 share price is more reasonable based on the difficulty that momentum names have seen in sustaining premium valuation ranges this year.

While a 25% gain in this market is nothing to sneeze at, we don't see any rush to initiate a model portfolio position in Data Direct. As soon as we believe it is time to strike, we'll let readers know immediately. (If you would like to receive this alert, click here for a free trial.)

Michael Comeau manages TheStreet.com Breakout Stocks service and regularly writes about equities that are poised for large growth, such as Akamai Technologies ( AKAM), GameStop ( GME) and Perfect World ( PWRD), for TheStreet.com .

In keeping with TSC's editorial policy, Michael Comeau doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Comeau is a research analyst at TheStreet.com. In this role he performs stock analysis for TheStreet.com Breakout Stocks, and is also a regular contributor to RealMoney.com. Prior to his arrival at TSC in June 2004, Comeau worked as a Consultant to Toyota Motor North America, performing in-depth research on automotive industry issues, primarily in the areas of alternative engine technologies, competitive analysis and macroeconomics. His primary market interests include consumer technology, specialty retail, and small-caps. Comeau received a bachelor's degree in Finance from Brooklyn College, and has completed Level 1 of the CFA program.. He appreciates your feedback; click here to send him an email.