Five Dirt-Cheap Small-Caps to Consider

BOSTON (TheStreet) -- The Russell 2000, a small-cap barometer, has declined 3% during the past month as the stock market suffered a mild correction. Here are five cheap small-company stocks to consider buying.

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, as revenue declined 2% to $17 million. The company's 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 Service decreased 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 4% 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 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 72% during the past year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 17, a discount to health-care-supply peers. The shares offer a 1% dividend yield.

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

The numbers: Third-quarter net income surged 168% to $3.8 million, and earnings per share increased 136% to 52 cents. Revenue climbed 5% to $25 million. The company's operating margin rose from 10% to 23%. A quick ratio of 3 and debt-to-equity ratio of 0.4 reflect fiscal prudence.

The stock: Orchids Paper Products soared 83% during the past year, outperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 10, a discount to household-products peers. Orchids doesn't pay dividends.

2. Hawkins ( HWKN) sells specialty chemicals.

The numbers: Fiscal third-quarter profit dropped 20% to $5.6 million, or 54 cents a share, as revenue fell 20% to $61 million. The company's operating margin inched up from 15% to 16%. Hawkins has an ideal financial position, with $14 million of cash and no debt.

The stock: Hawkins climbed 37% during the past year, more than the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio of 10, a discount to chemical peers. The shares offer a 2.7% 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 advanced 13% to $22 million. The company's operating margin narrowed 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 advanced 6% during the past year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 9, a discount to insurance peers. The shares offer a 1.3% dividend yield.

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