10 Small-Caps Expected to Rise Up to 71%

BOSTON (TheStreet) -- The Russell 2000 small-cap benchmark has rallied 8.5% in September. If the economy strengthens, small-cap stocks are likely to outperform large-caps.

Investors who are piling into bonds could miss out on major upside if fear subsides. Here are 10 small-cap stocks predicted to rise at least 52% in the next 12 months, based on analysts' median targets. They have market values between $500 million and $1.5 billion, and are ordered by expected return.

10. P.H. Glatfelter ( GLT) makes and sells specialty papers and fiber-based products. Its second-quarter profit plummeted 99% to $100,000, or break-even per share, beating expectations for a $500,000 loss. Revenue increased 30% to $365 million. The operating margin turned positive. Glatfelter's stock trades at a trailing earnings multiple of 5.5, a forward earnings multiple of 9, a book value multiple of 1.1 and a cash flow multiple of 2.8 -- 83%, 64%, 21% and 59% discounts to paper products industry averages. Three out of four analysts rate it "buy."

9. MasTec ( MTZ) is a specialty contractor of utility and communications infrastructure. Second-quarter profit decreased 23% to $15 million, or 18 cents a share, as revenue gained 28% to $495 million. The operating margin extended from 6.3% to 6.6%. MasTec's stock sells for a forward earnings multiple of 8.8, a book value multiple of 1.4, a sales multiple of 0.4 and a cash flow multiple of 7.5 -- 44%, 24%, 21% and 55% discounts to construction and engineering peer averages. Of analysts covering MasTec's stock, 11, or 79%, rate it "buy" and three rank it "hold."

8. Volterra Semiconductor ( VLTR) designs analog and mixed-signal chips. Second-quarter profit rose eightfold to $9 million, or 34 cents a share, as revenue soared 77%. The operating margin stretched from 11% to 26%. Volterra's stock trades at a book value multiple of 4.3, a 22% discount to the semiconductor industry average. Its PEG ratio, a measure of value relative to predicted long-run growth, of 0.1 signals a 90% discount to estimated fair value. Of analysts following Volterra, 13, or 81%, advise purchasing its shares and three recommend holding them.

7. Chiquita Brands ( CQB) distributes bananas, produce and healthy snacks. Second-quarter profit ascended 6.4% to $95 million, or $2.06 a share, as revenue declined 3.8%. The operating margin narrowed from 11% to 7.9%. Chiquita's stock sells for a trailing earnings multiple of 9.1, a forward earnings multiple of 5.9, a book value multiple of 0.8 and a sales multiple of 0.2 -- 55%, 62%, 81% and 88% discounts to food products peer averages. Of analysts covering Chiquita, three advocate buying its stock and one advises holding it.

6. Veeco Instruments ( VECO) sells equipment used to make semiconductor, data-storage and wireless products. Veeco swung to a second-quarter profit of $52 million, or $1.20 a share, from a year-earlier loss. Revenue more than tripled to $253 million. The operating margin turned positive. Veeco's stock trades at a trailing earnings multiple of 15, a forward earnings multiple of 7.5, a book value multiple of 3.1 and a cash flow multiple of 9.1 -- 27%, 40%, 44% and 35% discounts to industry averages. Around 80% of analysts rate it "buy" and 20% rank it "hold."

5. Cedar Fair ( FUN) owns and operates amusement and water parks. It is structured as a limited partnership, paying quarterly cash distributions, which are taxed differently than dividends. Cedar Fair swung to a second-quarter loss of $4.2 million, or 8 cents a share, from a year-earlier profit. Revenue ascended 4.3%. Cedar Fair's stock sells for a forward earnings multiple of 9.2, a sales multiple of 0.7 and a cash flow multiple of 3.9 -- 63%, 73% and 70% discounts to industry averages. Of researchers following the stock, four rate it "buy" and one ranks it "hold."

4. Entegris ( ENTG) sells integrity-management products to semiconductor, fuel-cell and life-sciences companies. It swung to a second-quarter profit of $18 million, or 14 cents a share, from a year-earlier loss. Revenue more than doubled. The operating margin climbed from the negatives to positive 16%. The stock trades at a forward earnings multiple of 5.6, a book value multiple of 1.5 and a cash flow multiple of 8.4 -- 53%, 73% and 37% discounts to peer averages. Of analysts rating Entegris, seven advise purchasing its shares and one recommends holding them.

3. Penn Virginia ( PVA) is an independent onshore oil-and-gas explorer, with operations in East Texas, the Mid-Continent region and the Appalachian basin. Penn Virginia swung to a second-quarter profit of $31 million, but a per share loss of 46 cents. The operating margin remained negative. Penn Virginia's stock sells for a book value multiple of 0.7, a sales multiple of 1.3 and a cash flow multiple of 3.8 -- 83%, 27% and 47% discounts to oil and gas industry averages. Of researchers evaluating the stock, 10, or 83%, rate it "buy" and two rank it "hold."

2. Diodes ( DIOD) makes signal and switching chips for electronic devices. Diodes swung to a second-quarter profit of $17 million, or 37 cents a share, from a year earlier loss. Revenue grew 44%. The operating margin rose from 5.4% to 16%. Diodes shares trade at a forward earnings multiple of 9, a book value multiple of 1.5 and a cash flow multiple of 8.2 -- 28%, 72% and 41% discounts to peer averages. Its PEG ratio of 0.1 signals a 90% discount to fair value. Of analysts covering Diodes, 10, or 77%, advise purchasing its shares and three suggest holding them.

1. True Religion Apparel ( TRLG) sells denim and other apparel. Second-quarter profit dropped 31% to $7.5 million, or 30 cents a share, as revenue grew 14% to $7.5 million. The operating margin decreased from 25% to 20%. True Religion's stock sells for a forward earnings multiple of 8.4, a book value multiple of 2.4 and a cash flow multiple of 8.2 -- 51%, 36% and 43% discounts to industry averages. Of researchers following True Religion, five, or 83%, rate its stock "buy" and one ranks it "hold."

-- Written by Jake Lynch in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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