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Looking for a hidden jewel in the market? Well sometimes the best times to look for them is when the market is manic and volatility is rampant. One way to find small cap stocks that may hold a large amount of potential is by looking at its Price/CFO Ratio. One unique characteristic of this ratio is that it accounts for non-cash factors and depreciation by removing them to provide a clearer picture of how much cash the firm is actually receiving from business operations.

We ran a screen for small cap stocks that appear undervalued according to their P/CFO Ratio (X<10). From this, narrowed pool we then screened for firms with strong liquidity (Current Ratio>2).

The list is ranked from the lowest to highest by the P/CFO Ratio.

1. Evercore Partners (EVR)

Sector

Financial Services

Industry

Capital Markets

Market Cap

$630M

Beta

1.09

The company is a boutique investment bank with a global presence. The firm's P/CFO Ratio is 8.83. The firm's Current Ratio is 2.01. The short interest is 7.90% as of 08/15/2011.

2. Stein Mart (SMRT)

Sector

Consumer Activity

Industry

Apparel Stores

Market Cap

$ 298M

Beta

3.01

A retailer store that offers prices competitive with off-price retail chains. The firm’s P/CFO Ratio is 4.28. The firm’s Current Ratio is 2.03. The short interest is 3.10% as of 08/15/2011.

3. Chiquita Brands International (CQB)

Sector

Consumer Defensive

Industry

Farm Products

Market Cap

$439M

Beta

2.12

The company operates and distributes fresh produce across the world. The firm’s P/CFO Ratio is 2.91. The firm’s Current Ratio is 2.04. The short interest is 14.90% as of 08/15/2011.

4. Prestige Brands Holdings Inc (PBH)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$511M

Beta

1.45

The company offers over-the-counter personal care, healthcare, and household cleaning brands to mass merchandisers, drug stores, supermarkets and more in North America. The firm’s P/CFO Ratio is 6.28. The firm’s Current Ratio is 2.05. The short interest is 4.70% as of 08/15/2011.

5. Sanmina-SCI Corp (SANM)

Sector

Technology

Industry

Contract Manufacturers

Market Cap

$613M

Beta

3.45

The company offers custom integrated electronics manufacturing services. The firm’s P/CFO Ratio is 5.18. The firm’s Current Ratio is 2.06. The short interest is 6.50% as of 08/15/2011.

6. CSG Systems International, Inc (CSGS)

Sector

Technology

Industry

Software - Application

Market Cap

$457M

Beta

0.75

The company is provides of outsourced billing, customer care and mail solutions in North America. The firm’s P/CFO Ratio is 6.69. The firm’s Current Ratio is 2.08. The short interest is 5.70% as of 08/15/2011.

7. Scientific Games Corporation (SGMS)

Sector

Consumer Cyclical

Industry

Gambling

Market Cap

$739M

Beta

1.75

The company is a supplier of technology-based products, systems and services to gaming markets worldwide. The firm’s P/CFO Ratio is 4.46. The firm’s Current Ratio is 2.08. The short interest is 8.70% as of 08/15/2011.

8. Boise Inc (BZ)

Sector

Basic Materials

Industry

Paper & Paper Products

Market Cap

$659M

Beta

3.96

The company's P/CFO Ratio is 1.99. The firm’s Current Ratio is 2.19. The short interest is 6.00% as of 08/15/2011.

9. Belo Corporation (BLC)

Sector

Consumer Cyclical

Industry

Broadcasting - TV

Market Cap

$533M

Beta

3.64

The company operates a group of television broadcasting, newspaper publishing, and other media outlets. The firm’s P/CFO Ratio is 4.64. The firm’s Current Ratio is 2.21. The short interest is 7.00% as of 08/15/2011.

10. Seaspan Corporation (SSW)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$857M

Beta

1.17

The company operates containerships worldwide. The firm’s P/CFO Ratio is 4.43. The firm’s Current Ratio is 2.21. The short interest is 4.10% as of 08/15/2011.

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Undervalued Small Cap Stocks With Large Amounts Of Cash