Five Small-Cap Stocks With Growth Potential

BOSTON ( TheStreet) -- Small-cap stocks have been trailing blue-chips in recent weeks, but these companies have the potential to outpace large-cap names.

5. Continucare ( CNU) provides outpatient services at 15 medical centers.

The numbers: Fiscal first-quarter net income doubled to $5.3 million, or 9 cents a share. Revenue grew 17% to $76 million. Continucare's gross margin expanded from 17% to 22%, and its operating margin widened from 6% to 11%. The company has an ideal financial position, with $23 million of cash and no debt.

The stock: Continucare has rallied 49% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 11, a discount to the market and health care service peers. Continucare doesn't pay dividends.

4. International Shipholding ( ISH) provides maritime transport services.

The numbers: Third-quarter net income was little changed at $11 million, or $1.55 a share. Revenue jumped 9% to $92 million. International Shipholding's gross margin narrowed from 25% to 22%, and its operating margin dropped from 13% to 11%. A quick ratio of 1.6 indicates adequate liquidity. A debt-to-equity ratio of 0.7 reflects conservative leverage.

The stock: International Shipholding has risen 30% this year, more than the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio of 7, a discount to the market and marine peers. The shares have a 6.1% dividend yield.

3. American Physicians Service Group ( AMPH) sells medical liability insurance and manages investments.

The numbers: Third-quarter net income fell 10% to $6.4 million, or 92 cents a share. Revenue grew 13% to $22 million. The company's gross margin fell from 64% to 49%, and its operating margin decreased from 56% to 43%. American Physicians Service Group has $30 million of cash and $6.6 million of debt.

The stock: American Physicians Service Group has risen 6% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 9, a discount to the market and insurance peers. The shares pay a 1.3% dividend yield.

2. Neogen ( NEOG) sells food-safety tests.

The numbers: Fiscal first-quarter net income increased 18% to $4.4 million, or 29 cents a share, as revenue grew 12% to $32 million. Neogen's gross margin expanded from 55% to 57%, and its operating margin rose from 20% to 21%. The company has an ideal financial position, with $24 million of cash and no debt.

The stock: Neogen has risen 32% this year, beating the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 34, a premium to the market and health care supply peers. Neogen doesn't pay dividends.

1. Hawkins ( HWKN) makes specialty chemicals.

The numbers: Fiscal second-quarter net income declined 2% to $6.7 million, or 65 cents a share, as revenue dropped 17% to $65 million. The company's gross margin increased from 24% to 29%, and its operating margin expanded from 14% to 17%. Hawkins has an ideal financial position, with $37 million of cash and no debt.

The stock: Hawkins has rallied 44% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 9, a discount to the market and chemical peers. The shares have a 2.6% dividend yield.

Now see five mid-cap stocks set to gain >>>

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