BOSTON ( TheStreet) -- The shift to large-cap stocks that began last fall has helped lower the prices of many small-cap names. Here are five cheap stocks with strong fundamentals.

5. Connecticut Water Service ( CTWS) is a regulated water utility.

The numbers: Third-quarter profit doubled to $5.8 million, or 67 cents a share. Revenue declined 2% to $17 million. The company's gross margin widened from 41% to 46%, and its operating margin extended from 32% to 36%. Connecticut Water Service has a poor liquidity position, evident in its quick ratio of 0.5. Its 1.1 debt-to-equity ratio indicates sizable leverage.

The stock: Connecticut Water increased 5% during the past year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 18, a premium to water utility peers. The shares offer a 3.8% dividend yield.

4. Atrion ( ATRI) sells health care supplies.

The numbers: Third-quarter profit rose 12% to $4.5 million, or $2.20 a share, as revenue climbed 7% to $25 million. Atrion's gross margin inched up from 51% to 52%, and its operating margin climbed from 25% to 26%. The company has an ideal financial position, with $19 million of cash and no debt.

The stock: Atrion soared 69% during the past year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 19, a discount to health care suppliers. The shares offer a 0.9% dividend yield.

3. Orchids Paper Products ( TIS) makes paper towels and napkins.

The numbers: Third-quarter net income more than doubled to $3.8 million, or 52 cents a share. Revenue climbed 5% to $25 million. The company's gross margin jumped from 20% to 34%, and its operating margin widened from 10% to 23%. Orchids has a stable financial position, reflected by its quick ratio of 3 and its debt-to-equity ratio of 0.4.

The stock: Shares of Orchids Paper Products have more than doubled during the past year, outperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 11, a discount to household-product makers. Orchids Paper Products doesn't pay dividends.

2. Hawkins ( HWKN) sells specialty chemicals.

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

The stock: Hawkins climbed 37% during the past year, more than the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 9, a discount to chemical peers. The shares offer a 2.6% dividend yield.

1. 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 shrank from 64% to 49%, and its operating margin decreased from 56% to 43%. American Physicians Service has $30 million of cash and $6.6 million of debt.

The stock: American Physicians Service has advanced 8% during the past year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 9, a discount to insurers. The shares offer a 1.4% dividend yield.

Now check out five mid-cap stocks to consider in 2010 >>>

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