Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- 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.

Aceto ( ACET) engages in sourcing, quality assurance, regulatory support, marketing, and distribution of chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals and crop protection products. We have rated it a buy since August 2008. Our rating is based on a variety of strengths, including the company's impressive record of earnings per share growth and its largely solid financial position.

For the first quarter of fiscal 2009, the company announced quarterly sales of $93.8 million, an increase of 18% year over year. With a continued focus on cost containment and a shift in business mix contributed to a close to 200 basis point expansion in gross margin to 20.18% in the most recent period versus 18.3% a year earlier. Aceto's first quarter net income rose by over 250% when compared to the same quarter a year ago. This growth in turn helped boost EPS, which improved from 5 cents in the first quarter of fiscal 2008 to 18 cents in the most recent quarter. This continued a pattern of positive EPS growth demonstrated by Aceto over the past two years.

Management reported that sales growth in both the health sciences and chemicals and colorants segments (up 21.3% and 19.2% year over year, respectively) more than offset a 23.2% decrease in crop protection sales. The strength in the health sciences segment was attributed mainly to increased sales from foreign operations -- particularly in Europe -- and to increases in domestic generic and nutritional products. Sales growth in chemicals and colorants experienced good growth in pigments, dyes and miscellaneous intermediates, as well as a boost from foreign operations, according to management. One weakness in the company's results was relatively weak operating cash flow generation. However, with a very clean balance sheet and positive working capital, we feel the positives far outweigh any negatives for the company at this time.

American Physicians Service Group ( AMPH) is an insurance and financial services firm. We've rated it a buy since May 2003. This rating is supported by several positive factors, including its largely solid financial position, notable return on equity, expanding profit margins, good cash flow from operations and growth in EPS.

For the third quarter of fiscal 2008, the company reported that its EPS improved 35.6% year over year, rising from 73 cents to 99 cents. This continues a trend of positive EPS growth over the past two years. Return on equity improved slightly when compared to the same quarter one year prior, rising from 14.4% to 17%, while net operating cash flow increased significantly, rising 264.7% to $7.5 million. In addition, the company's debt-to-equity is very low at 0.1, implying there has been very successful management of debt levels.

Management acknowledged that the company's Financial Services business has been affected by overall market turmoil, but pointed out that it was able to achieve strong earnings and cash flow results while sticking with its conservative policies in regards to underwriting, reserving, and investing. The company was also able to work toward expanding its business during the quarter, with the number of policy holders increasing 6%. The company undertook cost-cutting measures and will continue to adjust its business in order achieve profitability. Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from American Physicians Service Group's generally positive outlook.

NCI ( NCIT) is a provider of IT services and solutions to U.S. federal government agencies. The company focuses on designing, implementing, maintaining, and upgrading IT systems and networks by leveraging its skills across four core service offerings: network engineering; information assurance; systems development and integration; and enterprise systems management. A majority of the company's revenue comes from the delivery of mission-critical IT services to defense and intelligence agencies. Approximately three-quarters of NCI's employees work at customers sites, which gives the company a unique perspective on its customers' missions and technical environment.

NCI has been rated a buy since February 2008 based on its healthy growth in revenue and net income, solid stock price performance, impressive record of EPS growth, and return on equity. For the third quarter of fiscal 2008, the company reported revenue growth of 18.7% year-over-year. This growth represents record revenue results for the company, and appears to have trickled down to NCI's bottom line, improving EPS by 28%. EPS increased from 25 cents in the third quarter of fiscal 2007 to 32 cents in the most recent quarter. Net income also increased, rising 31.6% from $3.3 million to $4.4 million. Return on equity improved slightly from 16.2% to 16.6%. NCI's strong earnings growth has helped the stock price climb higher over the past year.

Management announced that it was pleased with what it considered excellent quarterly results and considers NCI well-placed in its markets and with its customers for fiscal 2009. The company is confident about its business model and plans to continue with its strategic plan of focusing on organic growth supplemented with strategic acquisitions that generate long-term, sustainable value. While an overall down market can negatively affect any stock, we feel that the company has good upside potential in any other market, despite the fact that it has already risen in the past year. In addition, we believe that the strengths detailed above outweigh the fact that the company shows low profit margins.

PetMed Express ( PETS) , which does business as 1-800-PetMeds, markets and sells prescription and non-prescription pet medications, along with other health products for dogs, cats and horses. We have rated it a buy since November 2004 due to such strengths as its solid stock price performance, growth in net income and revenue, and largely solid financial position.

The company announced on Oct. 20 that its revenue rose 15.6% year over year in the second quarter of fiscal 2008. This growth helped lead to EPS growth of 38.9% when compared with the same quarter last year. The company has, in fact, demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. Net income also improved in the second quarter, rising 28.6% from $4.5 million in the second quarter of fiscal 2007 to $5.8 million in the most recent quarter. Strong earnings growth was key to helping drive the stock price higher over the last year, although other factors naturally played a role, as well. In addition, PetMed Express has no debt to speak of and a quick ratio of 5.5, factors which indicate the successful management of debt levels and the ability to cover short-term cash needs.

Management announced that it was pleased that its efforts to reduce operating expenses as a percentage of sales helped lead the company to a highly profitable second quarter. Looking ahead, PetMed Express plans to focus on capturing additional market share, as well as improving reorders and customer service levels. Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from the future financial performance of this company.

AAON ( AAON) and its subsidiaries manufacture and sell air-conditioning and heating equipment, primarily in the U.S. and Canada. We have rated it a buy since June 2005. This rating is supported by the company's growth in revenue and net income, notable return on equity, impressive record of EPS growth and good cash flow from operations.

For the third quarter of fiscal 2008, AAON's revenue rose 11.8% year over year. Higher volume and improved productivity resulted in increased net income, which improved 55.2% when compared to the same quarter a year ago. The company also reported a significant EPS increase from 28 cents to 47 cents per share. AAON achieved record net sales of $79.3 million in the third quarter, an increase of 12%. Net sales were boosted by AAON's diversified customer mix, a favorable response to its new and redesigned products, and price increases. Another clear sign of strength is that the company's current ROE exceeded that of the same quarter a year ago. In addition, AAON's net operating cash flow increased 68.1%, vastly surpassing the industry average of -36.8%.

Looking ahead, management stated that it anticipates traditionally weaker results in the fourth quarter of fiscal 2008. However, the company also expects to see record sales and earnings for the full fiscal year. Although the company shows low profit margins, we feel that its strengths outweigh any potential weaknesses at this time.

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.

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