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The markets may continue to gyrate relentlessly in a range bound pattern but that doesn’t mean some names aren’t making a clear trend higher. Sometimes the easiest way to find companies that are going places regardless of the market is to stick with the fundamentals of sound profitability. Today we’re ready to point out to the mindful investor that potential opportunities still exist in areas such as the small cap space where sound profitability and real bullish momentum are going hand in hand right now.

Return on Assets (ROA) illustrates how much a firm is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the firm’s assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.

Return on Assets (ROA)=Net Income/Total Assets

We ran a screen for small cap stocks that illustrated strong profitability (ROA>10%). From this narrowed list of candidates we then looked for names that have outperformed the S&P 500 in the last month despite substantial volatility. We did not screen out any sectors or market caps. We did not screen out any sectors.

The list is ranked from highest to lowest by the 1-month performance:

1. Xyratex, Ltd. (XRTX)

Sector

Technology

Industry

Data Storage

Market Cap

$395M

Beta

1.95

The company offers storage process technology and modular enterprise-class data storage solutions. XRTX has an ROA (TTM) of 24.00% & gained by 56.68% in the last month. The short interest was 11.10% as of 10/14/2011.

2. Brooks Automation, Inc. (BRKS)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$704M

Beta

1.64

The company supplies technology products and solutions in the semiconductor space. BRKS has an ROA (TTM) of 11.38% & gained by 30.84% in the last month. The short interest was 4.20% as of 10/14/2011.

3. Usana Health Sciences, Inc. (NYSE:USNA)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$526M

Beta

1.04

The company develops and sells science-based nutritional and personal care products. USNA has an ROA (TTM) of 22.40% & gained by 25.94% in the last month. The short interest was 42.90% as of 10/14/2011 .

4. Giant Interactive Group, Inc. (GA)

The company develops and operates online games in Mainland China. GA has an ROA (TTM) of 11.11% & gained by 22.59% in the last month. The short interest was N/A as of 10/14/2011.

5. Micrel, Inc. (MCRL)

Sector

Technology

Industry

Semiconductors

Market Cap

$696M

Beta

0.90

The company designs and builds a range of analog power ICs, mixed-signal, and digital ICs. MRCL has an ROA (TTM) of 16.77% & gained by 16.18% in the last month. The short interest was 7.10% as of 10/14/2011.

6. Grand Canyon Education, Inc. (LOPE)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$749M

Beta

0.55

The company has an ROA (TTM) of 15.61% & gained by 4.71% in the last month. The short interest was 8.00% as of 10/14/2011.

7. Renaissance Learning, Inc. (RLRN)

Sector

Technology

Industry

Software - Application

Market Cap

$488M

Beta

0.87

The company offers education software and technology from K-1 to K-12. RLRN has an ROA (TTM) of 44.41% & only lost -1.60% in the last month. The short interest was N/A as of 10/14/2011.

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

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

Source: 7 Small Caps Gaining Bullish Momentum