Balchem, Hawkins and Aaon: Top 5 Stocks

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

BOSTON ( TheStreet) -- The following companies have market values of $50 million to $500 million and receive "buy" ratings from our proprietary quantitative model, which considers more than 60 factors. They're ordered by their potential to appreciate, starting with the company with the best growth prospects.

American Physicians Service Group ( AMPH) provides medical professional liability insurance and investment management services.

The numbers: Second-quarter net income decreased 20% to $4.9 million and earnings per share fell 17% to 70 cents as revenue declined 13% to $20 million. The operating margin dropped from 51% to 38% and the net margin decreased from 35% to 24%. The company has an ideal financial position, with $46 million of cash, compared with $6.5 million of debt. A debt-to-equity ratio of 0.1 confirms fiscal prudence.

The stock: American Physicians Service Group is up 4% in 2009, underperforming major U.S. indices. The stock trades at a cheap price-to-earnings ratio of 8, but doesn't pay dividends.

Balchem ( BCPC) sells specialty performance ingredients for food, animal feed and pharmaceuticals.

The numbers: Second-quarter revenue declined 16% to $53 million, but net income surged 45% to $6.9 million and earnings per share climbed 44% to 36 cents. The operating margin improved from 12% to 19% and the net margin advanced from 8% to 13%. Balchem has boosted cash reserves 926% to $27 million since the year-earlier period. A quick ratio of 1.9 indicates a strong liquidity position, and just $6.8 million of debt reflects modest leverage.

The stock: Balchem is up 3% in 2009, underperforming major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 23 and offers a dividend yield below 1%.

NCI ( NCIT) provides IT consulting to government agencies.

The numbers: Second-quarter net income rose 26% to $5.1 million and earnings per share ascended 23% to 37 cents as revenue advanced 13% to $109 million. The operating margin rose to 8% and the net margin increased from 4% to 5%. A quick ratio of 1.6 demonstrates ample liquidity and a debt-to-equity ratio of 0.2 indicates modest leverage.

The stock: NCI is flat in 2009, underperforming major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 22 and doesn't pay dividends. As the federal government seeks to reduce budget deficits and trim spending, NCI's services will be in demand.

Hawkins ( HWKN) manufactures specialty chemicals.

The numbers: Fiscal first-quarter net income grew 24% to $6.1 million and earnings per share jumped 26% to 58 cents as revenue increased 18% to $74 million. The operating margin advanced from 12% to 13% and the net margin passed 8%. Hawkins has an ideal financial position with no debt and ample cash reserves, evident in its quick ratio of 2.8. We give the company a financial strength score of 8.9 out of 10, higher than the "buy"-list average.

The stock: Hawkins has increased 35% in 2009, more than major U.S. indices. Yet the stock trades at a price-to-earnings ratio of 9, indicating a vast discount to peers and the overall market, and offers a 2.7% dividend yield.

Aaon ( AAON) makes air-conditioning and heating equipment.

The numbers: Second-quarter net income decreased 9% to $7.1 million and earnings per share fell 5% to 41 cents as revenue declined 8% to $69 million. The operating margin inched past 16% and the net margin hovered above 10%. Aaon has an admirable financial position. Its balance sheet holds $14 million of cash, translating to a quick ratio of 1.3, and minimal debt.

The stock: Aaon has advanced 3% in 2009, less than major U.S. indices. The stock trades at an attractive price-to-earnings ratio of 13, indicating a discount to the market, but offers a lackluster 1.7% dividend yield.

TSC Ratings was given an award this year for "Best Stock Selection" among independent research providers by BNY ConvergEx Group. A rating can be viewed for any stock through our screener. Ratings are derived from a variety of fundamental and pricing figures and represent our opinion of risk-adjusted performance. However, the rating doesn't incorporate all factors that can alter a stock's performance.

-- Reported by Jake Lynch in Boston.

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