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Top five small-cap stocks Add to ...

The following companies have market capitalizations between $50-million (U.S.) and $500-million and "buy"-ratings from our proprietary quantitative model, which considers more than 60 factors. They are ordered by their potential to gain.

PetMed Express sells medication and health products for dogs, cats and horses.

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The numbers: Fiscal first-quarter revenue increased 13 per cent to $77-million. Net income grew 22 per cent to $8.1-million and earnings per share climbed 29 per cent to 36 cents, helped by a lower share count. Its operating margin increased from 14 per cent to 16 per cent and its net margin passed 10 per cent. The company has no debt and a quick ratio of 3.7, which indicates outstanding liquidity.

The stock: PetMed is up 3 per cent this year, underperforming the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a fair price-to-earnings ratio of 17 and doesn't pay dividends.

Applied Signal Technology provides intelligence, surveillance and reconnaissance solutions for the defense and homeland security markets.

The numbers: Fiscal second-quarter revenue increased 18 per cent to $54-million as earnings doubled to $4-million, or 31 cents per share. Its operating margin climbed to 12 per cent and its net margin rose to 8 per cent. The company has an ideal financial position, with just $4-million of debt and $55-million of cash, amounting to a quick ratio of 4.6 and a debt-to-equity ratio just above zero.

The stock: Applied Signal Technology has advanced 32 per cent this year, outperforming major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 25 and offers a lackluster 2.1 per cent dividend yield.

Aaon sells air-conditioning and heating equipment in the U.S. and Canada.

The numbers: First-quarter revenue decreased 2 per cent to $64-million, but net income rose 5 per cent to $6.7-million and earnings per share jumped 11 per cent to 39 cents, boosted by a lower share count. Its operating margin increased from 14 per cent to 16 per cent and its net margin climbed to 11 per cent. A quick ratio of 1.2 demonstrates Aaon's strong liquidity position. The company has minimal debt.

The stock: Aaon has dropped 3 per cent this year, lagging major U.S. indices. The stock trades at a cheap price-to-earnings ratio of 12 and offers a weak 1.8 per cent dividend yield.

Balchem sells specialty ingredients for food, animal feed and pharmaceuticals.

The numbers: Second-quarter revenue declined 16 per cent to $53-million, but net income surged 45 per cent to $6.9-million, or 36 cents. Its operating margin increased from 12 per cent to 19 per cent and its net margin advanced from 8 per cent to 13 per cent. Balchem has boosted cash reserves tenfold to $27 million from the year-earlier quarter. A quick ratio of 1.9 indicates a strong liquidity position and just $6.8-million of long-term obligations reflects modest leverage.

The stock: Balchem is up 7 per cent this year, beating the Dow, but underperforming the S&P 500. The stock trades at an expensive price-to-earnings ratio of 24 and offers a dividend yield less than 1 per cent.

Bio-Reference Laboratories provides clinical lab testing services in the New York area.

The numbers: Fiscal second-quarter earnings grew 35 per cent to $4.6 million, or 33 cents, as revenue advanced 16 per cent to $87 million. Its operating margin increased from 8 per cent to 10 per cent and its net margin inched past 5 per cent. The company has an admirable financial position, with $13 million of cash reserves, amounting to a quick ratio of 1.8, and a debt-to-equity ratio of just 0.3.

The stock: Bio-Reference is up 14 per cent this year, outpacing the Dow and S&P 500. The stock trades at a costly price-to-earnings ratio of 23 and doesn't pay dividends.

 

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