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The Price/Sales ratio is a valuation metric that uses its trailing sales to indicate whether a stock may potentially be undervalued, fairly priced, or overvalued. The ratio can be found by dividing a stock's current closing price with the firm’s sales (revenue) per share. If the P/S ratio for a stock is over 3 it is generally considered to be trading for a premium. The idea here is that an investor is paying $3 for every $1 worth of sales On the other hand, if the firm’s ratio is at 1 or below it’s considered to be undervalued according to this metric.

We ran a screen for small cap stocks that appeared to be undervalued according to their P/S ratio. From this narrowed pool we screened for firms that have also come well off their 52-Week highs. We did not screen out any sectors.

The firms are listed from highest to lowest by their respective P/S ratio:

1. Strategic Hotel & Resorts, Inc. (BEE)

Sector

Real Estate

Industry

REIT - Hotel & Motel

Market Cap

$852M

Beta

3.00

This firm is a REIT that owns and operates luxury hotels around the world. BEE has a P/S ratio of 1.00. The firm is 39.76% below the 52-week High. The short interest was 6.70% as of 09/30/2011.

2. Harmonic, Inc. (HLIT)

Sector

Technology

Industry

Communication Equipment

Market Cap

$513M

Beta

1.43

The firm designs and sells products and systems that allow network operates to deliver broadcast and on-demand services. HLIT has a P/S ratio of 0.96. The firm is 55.92% below the 52-week High. The short interest was N/A as of 09/30/2011.

3. Sunstone Hotel Investors, Inc. (SHO)

Sector

Real Estate

Industry

REIT - Hotel & Motel

Market Cap

$731M

Beta

3.18

The firm operates and franchises upscale hotels in the US. SHO has a P/S ratio of 0.94. The firm is 44.57% below the 52-week High. The short interest was N/A as of 09/30/2011.

4. Texas Roadhouse, Inc. (TXRH)

Sector

Consumer Cyclical

Industry

Restaurants

Market Cap

$959M

Beta

0.99

The firm is a casual dining restaurant chain. TXRH has a P/S ratio of 0.93. The firm is 27.54% below the 52-week High. The short interest was 14.40% as of 09/30/2011.

5. Maidenform Brands, Inc. (MFB)

Sector

Consumer Cyclical

Industry

Apparel Manufacturing

Market Cap

$557M

Beta

1.44

The firm designs and markets an extensive range of intimate apparel products. MFB has a P/S ratio of 0.92. The firm is 26.41% below the 52-week High. The short interest was 10.40% as of 09/30/2011.

6. OmniVision Technologies, Inc. (OVTI)

Sector

Technology

Industry

Semiconductors

Market Cap

$930M

Beta

1.56

The firm designs, manufactures, and markets semiconductor image sensor devices. OVTI has a P/S ratio of 0.91. The firm is 57.89% below the 52-week High. The short interest was N/A as of 09/30/2011.

7. Sinclair Broadcast Group, Inc. (SBGI)

Sector

Consumer Cyclical

Industry

Broadcasting - TV

Market Cap

$690M

Beta

1.96

The firm is a diversified television broadcasting company in the US. SBGI has a P/S ratio of 0.91. The firm is 34.74% below the 52-week High. The short interest was 8.60% as of 09/30/2011.

8. Caribou Coffee Company, Inc. (CBOU)

Sector

Consumer Cyclical

Industry

Restaurants

Market Cap

$270M

Beta

1.28

The firm is a gourmet coffeehouse chain in the U.S. CBOU has a P/S ratio of 0.90. The firm is 25.29% below the 52-week High. The short interest was 8.60% as of 09/30/2011.

9. Pennsylvania REIT. (PEI)

Sector

Real Estate

Industry

REIT - Retail

Market Cap

$419M

Beta

3.18

The firm owns and operating shopping malls along with strip centers. PEI has a P/S ratio of 0.90. The firm is 56.63% below the 52-week High. The short interest was 7.50% as of 09/30/2011.

10. Belo Corporation. (BLC)

Sector

Consumer Cyclical

Industry

Broadcasting - TV

Market Cap

$609M

Beta

3.70

The company operates a diversified group of television broadcasting, newspaper publishing, and other media operations. BLC has a P/S ratio of 0.89. The firm is 36.68% below the 52-week High. The short interest was 9.10% as of 09/30/2011.

We hope this list helps investors as they do their own due diligence on small cap companies that appear cheap by their P/S ratio and no longer trade near their 52-week highs. Last, these were the top ten firms listed at the time when the article was written.

Source: 10 Oversold Small Cap Stocks That Appear Cheap By the Numbers