Five Undervalued Small-Cap Stocks

BOSTON (TheStreet) -- Here are five small companies with strong fundamentals and cheap shares.

5. Oil-Dri Corp. of America ( ODC) sells absorbent products, including sponges and cat litter.

The numbers: Fiscal first-quarter profit declined 2.3% to $2.2 million, or 30 cents a share, as revenue dropped 15% to $53 million. Oil-Dri's operating margin expanded from 5.8% to 6.3%. The company holds $25 million of cash and $21 million of debt.

The stock: Oil-Dri has advanced 4.6% during the past year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to household products peers. The shares offer a 3.7% dividend yield.

4. NCI ( NCIT) is a technology consultant to the government.

The numbers: Fourth-quarter profit increased 36% to $6.7 million, or 49 cents a share, as revenue grew 23% to $125 million. NCI's operating margin narrowed from 8.5% to 7.4%. The company holds $1.2 million of cash and $42 million of debt.

The stock: NCI has fallen 11% during the past year, trailing U.S. benchmarks. The stock trades at a price-to-earnings ratio of 17, a discount to IT-services peers. NCI doesn't pay dividends.

3. Orchids Paper Products ( TIS) manufactures paper towels and napkins. The company is scheduled to report fourth-quarter results Feb. 24.

The numbers: Third-quarter net income surged 168% to $3.8 million and earnings per share increased 136% to 52 cents, restrained by a higher share count. Revenue climbed 5% to $25 million. The company's operating margin rose from 10% to 23%. Orchids holds $23 million of cash and $24 million of debt.

The stock: Orchids Paper Products has soared 77% during the past year, outperforming U.S. benchmarks. The stock trades at a price-to-earnings ratio of 11, a discount to household products peers. Orchids doesn't pay dividends.

2. National Bankshares ( NKSH) is a regional bank in Virginia.

The numbers: Fourth-quarter profit rose 14% to $3.8 million, or 55 cents a share, as revenue hovered at $15 million. The company's operating margin extended from 41% to 51%. National Bankshares holds $46 million of cash and no debt.

The stock: National Bankshares has soared 40% 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 13, a discount to commercial bank peers. The shares offer a 3.3% dividend yield.

1. PetMed Express ( PETS) sells pet medications online.

The numbers: Fiscal third-quarter net income increased 14% to $5.6 million, or 25 cents. Revenue rose 11% to $48 million. The company's operating margin remained steady at 17%. PetMed Express holds $57 million of cash and no debt.

The stock: PetMed Express has advanced 26% during the past year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to Internet retail peers. The shares offer a 2.2% dividend yield.

Next: Top Five Mid-Cap Stocks >>

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