Five Cheap Small-Caps Poised to Gain

BOSTON (TheStreet) -- Investors have been ditching small-cap stocks for blue-chips in recent months, causing the prices of lesser-known companies to drop. Here are five cheap companies with clean balance sheets.

5. German American Bancorp ( GABC) is a bank in southern Indiana.

The numbers: Third-quarter profit decreased 4% to $3.2 million, or 29 cents a share. Revenue dropped 4% to $20 million. German American Bancorp's gross margin rose from 66% to 71%, and its operating margin increased from 31% to 32%. The company is adequately capitalized, with $60 million of cash reserves. A debt-to-equity ratio of 1.3 indicates higher-than-ideal leverage.

The stock: German American Bancorp has increased 41% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to the market and regional bank peers. The shares have a 3.4% dividend yield. >>See #4

4. Peet's Coffee & Tea ( PEET) operates a chain of cafes and sells roasted whole beans in supermarkets.

The numbers: Third-quarter profit increased 22% to $2.5 million, or 19 cents a share. Revenue grew 8% to $74 million. The company's gross margin rose from 18% to 19%, but its operating margin was unchanged at 5%. Peet's has an ideal financial position, with $21 million of cash and no debt.

The stock: Peet's has risen 61% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 33, a premium to the market and restaurant peers. Peet's doesn't pay dividends. >>See #3

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

The numbers: Third-quarter profit 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 an admirable financial position, with $30 million of cash and $6.6 million of debt.

The stock: American Physicians Service Group has risen 8% this year, underperforming 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 have a 1.3% dividend yield. >>See #2

2. Hawkins ( HWKN) sells specialty chemicals.

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

The stock: Hawkins has rallied 39% 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. >>See #1

1. Neogen ( NEOG) sells food safety tests.

The numbers: Fiscal first-quarter profit increased 18% to $4.4 million, or 29 cents a share. Revenue grew 12% to $32 million. Neogen's gross margin ascended 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 28% this year, more than 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.

Now see five safe mid-cap stocks to own >>>

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