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.

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.

Met-Pro ( MPR) manufactures and sells product recovery and pollution control equipment for purification of air and liquids, as well as fluid handling equipment for corrosive, abrasive and high temperature liquids.

Met-Pro has been rated a buy since March 2007, based on such strengths as the company's revenue growth, increase in net income and largely solid financial position. For the second quarter of fiscal 2008, the company reported its highest second quarter results in company history in sales, net income, and earnings per share.

Net income increased 40.3% year over year, rising from $1.93 million to $2.70 million. Net sales climbed to $28.15 million from $26.10 million in the second quarter of fiscal 2007. EPS rose from 13 cents to 18 cents. Revenue also increased slightly, improving 7.8%. Met-Pro's debt-to-equity ratio is very low at 0.06, and its quick ratio is 3.21, implying that the company has successfully managed its debt levels and is able to cover its short-term cash needs.

Management announced that it was pleased with quarterly results that it felt clearly demonstrated a strong global demand for Met-Pro's products. While the company's stock price has risen over the last year, driven by its strong earnings growth, we feel that Met-Pro's strengths justify this higher price level, even though the stock is now somewhat expensive compared with others in its industry.

Quaker Chemical ( KWR) develops, produces and markets a broad range of formulated chemical specialty products for various heavy industrial and manufacturing applications. In addition, the company offers and markets chemical management services.

We have rated Quaker Chemical a buy since May 2007. On July 30, 2008, the company announced record net sales and net income for the second quarter of fiscal 2008. Net sales increased 15.0% year over year, primarily due to higher sales prices and favorable foreign-exchange translations, while net income increased 4.0%.

At 41 cents per share, earnings per diluted share were equal to those of the second quarter of fiscal 2007. Operating cash flow increased $14.3 million from a year ago, which led to a decrease in the company's net debt-to-total-capital ratio from 32% at the end of fiscal 2007 to 28% at the end of the most-recent quarter.

Management stated that Quaker Chemical should experience a solid growth year overall, despite the rising cost of raw materials. The company remains committed to making investments in key growth initiatives going forward. Bear in mind, however, that overall customer demand for products greatly affects Quaker's financial performance, so any downturn in its customers' businesses could negatively affect results, as could any unexpected shutdown in customer production. Continued increases in the costs of raw materials and overall economic conditions worldwide could also affect Quaker's future performance.

U.S. Physical Therapy ( USPH) operates about 350 clinics for outpatient physical and occupational therapy. These clinics provide preventive and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, as well as treatment for neurologically related injuries and rehabilitation of injured workers. The company was founded in 1990 and currently operates in 42 states.

U.S. Physical Therapy has been rated a buy since April 2008. This rating is driven by a number of strengths, such as its strong growth in revenue, earnings per share and income, as well its largely solid financial position and increasing cash flow from operations. For the second quarter of fiscal 2008, the company reported revenue growth of 33.6% year over year. This revenue growth helped the company achieve an EPS growth of 20.0% compared with the same quarter one year ago.

The company has continued a pattern of positive EPS growth over the past year and we feel that this trend should continue. Net income also increased, rising 24.0% from $2.30 million in the second quarter of fiscal 2007 to $2.86 million in the most recent quarter. The company appears to manage its debt level well and demonstrates the ability to cover its short-term cash needs. Additionally, its net operating cash flow increased significantly in the second quarter, rising 251.85% to $6.06 million.

During the second quarter, U.S. Physical Therapy acquired nine new locations in Maryland and Pennsylvania and opened seven new clinics. The company also announced the formation of a new venture, OsteoArthritis Centers of America, for the treatment of osteoarthritis, degenerative joint disease and other musculoskeletal conditions. The first of these new centers opened in June in Wellington, Fla.

Bear in mind that the company's future financial performance could be affected by general economic conditions, the availability of qualified physical and occupational therapists and changes in Medicare guidelines, among other factors.

National Research ( NCRI) assists the health care industry in the U.S. and Canada track performance at a variety of levels. The company provides survey-based performance management, analysis, tracking, and improvement and educational services and develops tools that enable health care organizations to obtain performance measurement information necessary to comply with industry and regulatory standards and to improve their business practices.

We have rated National Research a buy since November 2006. Our rating is based on a variety of strengths, including the company's expanding profit margins, good cash flow from operations and largely solid financial position. For the second quarter of fiscal 2008, net operating cash flow significantly increased by 58.91% when compared with the same quarter last year. Return on equity also improved slightly year over year.

The company's debt-to-equity ratio is very low at 0.08, implying successful management of debt levels. While National Research reported flat earnings per share for the second quarter vs. the year-earlier period and has a recent history of volatile earnings, we feel it is poised for EPS growth in the coming year.

Although no company is perfect, we do not currently detect any significant weaknesses that are likely to detract from the generally positive outlook for this company.

Integral Systems ( ISYS) builds satellite ground systems and equipment for command and control, integration and testing, data processing and simulation.

Integral Systems has been rated a buy since March 2005. For the third quarter of fiscal 2008, revenue improved 16.5% year over year, climbing to $41.8 million. Income from operations was reported as $7.1 million for the third quarter, compared with $5.3 million in the same quarter last year. The company also reported net income of $4.7 million, or 55 cents per diluted share, an increase from $3.8 million, or 34 cents per diluted share, reported in the third quarter of fiscal 2007.

During the third quarter, both gross profit and operating income grew significantly in the space communications systems and government ground systems segments. The company has experienced a 34.2% increase in its year-to-date revenue when compared with the same period last year.

Management feels that the third quarter results reflect a solid financial performance and growth in the above-mentioned segments. Significant momentum and financial resources are expected to allow the company to focus on strategic growth initiatives going into the fourth quarter and the start of the next fiscal year. The company expects that such initiatives will continue to drive value for its shareholders. Earnings projections for fiscal 2008 were raised to approximately $2.15 per share.

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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