TSC Ratings provides exclusive stock, ETF and mutual fund recommendations using proprietary tools. Our "safety-first" approach aims to reduce risk while achieving performance on a total return basis.

The following small-cap companies have market values of $50 million to $500 million, and receive "buy" ratings from TheStreet.com Ratings' proprietary quantitative model, which considers more than 60 factors. They are ordered by their potential to appreciate.

Hawkins ( HWKN) blends and distributes bulk and specialty chemicals for water treatment, and industrial and pharmaceutical use.

The numbers: Fiscal fourth-quarter revenue rose 32% to $68 million as net income surged 194% to $5.09 million and earnings per share climbed 182% to 48 cents. Operating margin increased 694 basis points to 11% and net margin jumped 413 basis points to 7.5%. The company has zero debt and ample liquidity, as reflected by a quick ratio of 2.1.

The stock: Hawkins has risen 43% in 2009, far outperforming the Dow Jones Industrial Average and the S&P 500. Yet, the stock trades at a price-to-earnings ratio under 10, less than half the peer average of 20. The stock offers a weak 0.26% dividend yield.

Applied Signal Technology ( APSG) provides intelligence, surveillance and reconnaissance wares for the defense and homeland security markets.

The numbers: Fiscal second-quarter revenue increased 18% to $54 million as net income and earnings per share doubled to $4 million and 31 cents, respectively. Operating margin climbed 581 basis points to 12% and net margin ascended 314 basis points to 7.6%. The company has an ideal financial position, with just $4 million of debt and $55 million of cash, amounting to a high quick ratio of 4.62 and a low debt-to-equity ratio of 0.03.

The stock: Applied Signal Technology is up 25% in 2009, outperforming all major U.S. indexes. The stock trades at an expensive price-to-earnings ratio of 24 and pays a 2.2% dividend yield.

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