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Profitability ratios often provide a good indication of how well a firm is being managed and how well it’s performing given current market conditions. One individual profitability ratio such as Return on Assets [ROA] won’t definitively reveal whether a company is a great opportunity or not, but it will help determine whether it's worth reviewing further.

The Return on Assets (ROA) ratio illustrates to investors the amount of earnings that have been generated from a firm’s asset base. This is an important profitability ratio, because in certain respects, management's most critical job is to wisely allocate a firm’s resources. Anyone can throw money at something to generate earnings, but few management teams can excel at generating a strong percentage return on assets.

We ran a screen for companies that have outperformed the S&P 500 (YTD Return) and that also had strong top line growth (1-Year Fiscal Revenue Growth>20%). From this narrowed pool, we then screened for firms that have an ROA (NYSE:TTM) ratio that is greater than 10%.

The list is ranked from highest to lowest by the 1-Year Fiscal Revenue Growth rate.

1. Momenta Pharmaceuticals, Inc. (MNTA)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$832M

Beta

1.27

Analyst Sentiment

5/8-List Buy/Outperform (Bullish)

The company specializes in process engineering and the characterization of complex molecules. MNTA’s Fiscal 1-Year Growth rate is 476.68%. The firm’s Return on Assets is 16.39%. The short interest for the firm is 16% as of 8/15/2011.

2. Kulicke & Soffa Industries Inc (KLIC)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$571M

Beta

2.93

Analyst Sentiment

3/4-List Buy/Outperform (Bullish)

The company designs and sells capital equipment and expendable tools for the technology sector. KLIC’s Fiscal 1-Year Revenue Growth rate is 238.65%. The firm’s Return on Assets is 24.5%. The short interest for the firm is 6% as of 8/15/2011.

3. Spreadtrum Communications, Inc (SPRD)

Sector

Technology

Industry

Semiconductors

Market Cap

$767M

Beta

1.55

Analyst Sentiment

10/13-List Buy/Outperform (Bullish)

The company designs and sells radio frequency (NYSE:RF) transceivers, baseband processors, and more in the wireless communications space. SPRD’s 1-Year Fiscal Revenue Growth rate is 229.63%. The firm’s Return on Assets is 13.22%. The short interest for the firm is N/A as of 8/15/2011.

4. JA Solar Holdings Co., ADR (JASO)

Sector

Technology

Industry

Solar

Market Cap

592

Beta

3.03

Analyst Sentiment

13/19-List Hold/Neutral (Neutral)

The company develops and sells photovoltaic solar cells and solar products in China. JASO’s 1-Year Fiscal Revenue Growth Growth rate is 211.25%. The firm’s Return on Assets is 14.71%. The short interest for the firm is N/A as of 8/15/2011.

5. Advanced Energy Industries (AEIS)

Sector

Technology

Industry

Electronic Components

Market Cap

$394M

Beta

1.95

Analyst Sentiment

7/12-List Hold/Neutral (Neutral)

Advanced Energy Industries, Inc., together with its subsidiaries, designs, manufactures, sells, and supports industrial power conversion products that transform power into various usable forms. AEIS’s 1-Year Fiscal Revenue Growth rate is 183.86%. The firm’s Return on Assets is 14.09%. The short interest for the firm is 7% as of 8/15/2011.

6. Brooks Automation, Inc. (BRKS)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$563M

Beta

1.66

Analyst Sentiment

7/9-List Hold/Neutral (Neutral)

The company offers automation & instrumentation solutions to the semiconductor manufacturing industry. BRKS’s 1-Year Fiscal Revenue Growth rate is 171.13%. The firm’s Return on Assets is 11.38%. The short interest for the firm is 4% as of 8/15/2011.

7. Power-One, Inc. (PWER)

Sector

Technology

Industry

Electronic Components

Market Cap

$687M

Beta

2.18

Analyst Sentiment

10/17 -List Buy/Outperform (Bullish)

The company designs and manufactures power conversion and power management products for a variety of industries. PWER’s 1-Year Fiscal Revenue Growth rate is 142.63%. The firm’s Return on Assets is 18.96%. The short interest for the firm is 44% as of 8/15/2011.

8. ReneSola Ltd. (SOL)

Sector

Technology

Industry

Solar

Market Cap

$261M

Beta

2.78

Analyst Sentiment

7/12 -List Hold/Neutral (Neutral)

The company is a manufacturer of solar wafers, which are thin sheets of crystalline silicon material primarily used in the production of solar cells. SOL’s 1-Year Fiscal Revenue Growth rate is 136.2%. The firm’s Return on Assets is 10.63%. The short interest for the firm is N/A as of 8/15/2011.

9. Enzon Pharmaceuticals, Inc. (ENZN)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$385M

Beta

1.16

Analyst Sentiment

1/1-List Buy/Outperform (Bullish)

The company develops therapeutics for cancer patients with unmet needs. ENZN’s 1-Year Fiscal Revenue Growth rate is 90.37%. The firm’s Return on Assets is 36.26%. The short interest for the firm is 17.40% as of 8/15/2011.

10. Higher One Holdings, Inc. (ONE)

Sector

Industrials

Industry

Business Services

Market Cap

$895M

Beta

N/A

Analyst Sentiment

7/9-List Buy/Outperform (Bullish)

The company offers payment and technology services to the higher education industry in the US. ONE’s 1-Year Fiscal Revenue Growth rate is 86.8%. The firm’s Return on Assets is 20.98%. The short interest for the firm is 17% as of 8/15/2011.

We hope this helps investors as they do their own due diligence on small cap companies.

Source: 10 Profitable, Small Cap Stocks With Strong Growth And Bullish Trends