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Strong profitability will always be a key driver to a higher stock price, but unfortunately that variable alone dictates nothing in the short term. Recently, this reality couldn't be more true when looking at the small cap space, where we found small cap names getting clobbered regardless of strong profitability. The point is that profitability alone will never be the end all, be all in the short run, and these small cap stocks with bearish momentum prove this all too true.

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. It also 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.

We first looked for small cap stocks with strong profitability (ROA TTM > 10%). From this narrowed list of candidates, we then looked for companies that have taken a rough ride in the market by underperforming the S&P 500 over the last three months. We did not screen out any sectors or market caps.

The list is ranked from highest to lowest by the ROA (TTM):

1. Pioneer Southwest Energy Partner (PSE)

Sector

Energy

Industry

Oil & Gas E&P

Market Cap

$909M

Beta

0.42

The company has an ROA (TTM) of 37.72% and has fallen by -9.37% in value over the last three months. The short interest was 1.50% as of 10/14/2011.

2. Enzon Pharmaceuticals, Inc. (NASDAQ:ENZN)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$358M

Beta

1.17

The company develops and commercializes therapeutics to treat cancer and related diseases. The company has an ROA (TTM) of 36.26% and has fallen by -24.38% in value over the last three months. The short interest was 18.50% as of 10/14/2011.

3. Revlon Inc. (NYSE:REV)

Sector

Consumer Defensive

Industry

Household & Personal Products

Market Cap

$769M

Beta

2.60

The company manufactures and sells a variety of personal care products. The company has an ROA (TTM) of 30.12% and has fallen by -12.53% in value over the last three months. The short interest was 6.20% as of 10/14/2011.

4. PDL BioPharma, Inc. (NASDAQ:PDLI)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$849M

Beta

0.19

A biopharmaceutical company focused on discovering, developing and commercializing innovative therapies for severe or life-threatening illnesses. The company has an ROA (TTM) of 29.01% and has only increased by 0.48% in value over the last three months. The short interest was N/A as of 10/14/2011.

5. Kulicke & Soffa Industries Inc. (NASDAQ:KLIC)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$702M

Beta

3.00

The company designs, manufactures and markets capital equipment and packaging materials, as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. Currently supplies semiconductor wire bonding assembly equipment. The company has an ROA (TTM) of 24.50% and only increased by 4.89% in value over the last three months. The short interest was 5.80% as of 10/14/2011.

6. GTx, Inc. (NASDAQ:GTXI)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$274M

Beta

0.87

A biopharmaceutical company dedicated to the discovery, development and commercialization of small molecules that selectively target hormone pathways to treat cancer, osteoporosis and bone loss, muscle wasting and other serious medical conditions. The company has an ROA (TTM) of 23.80% and has only increased by 4.30% in value over the last three months. The short interest was N/A as of 10/14/2011.

7. Capella Education Company. (NASDAQ:CPLA)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$503M

Beta

0.46

An online post-secondary education services company, which through its wholly-owned subsidiary, Capella University, offers doctoral, master's and bachelor's programs in the field of health and human services, business management and technology, and education. The company has an ROA (TTM) of 23.34% and has fallen by -18.57% in value over the last three months. The short interest was N/A as of 10/14/2011.

8. Valassis Communications Inc. (NYSE:VCI)

Sector

Consumer Cyclical

Industry

Marketing Services

Market Cap

$920M

Beta

3.76

The company provides a wide range of marketing products and services to a variety of premier manufacturers, direct marketers, retailers, franchisees and other advertisers. The company has an ROA (TTM) of 20.88% and has fallen by -27.13% in value over the last three months. The short interest was N/A as of 10/14/2011.

9. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)

Sector

Healthcare

Industry

Drug Manufacturers - Specialty & Generic

Market Cap

$559M

Beta

1.77

The company is a clinical-stage drug development company that discovers and develops novel, small molecule drugs for the treatment of inflammatory diseases, cancer and viral diseases. The company has an ROA (TTM) of 20.29% and has fallen by -9.67% in value over the last three months. The short interest was N/A as of 10/14/2011.

10. TriQuint Semiconductor. (NASDAQ:TQNT)

Sector

Technology

Industry

Semiconductors

Market Cap

$877M

Beta

2.04

The company is a supplier of high performance modules, components and foundry services for communications applications. The company has an ROA (TTM) of 19.51% and has fallen by -29.26% in value over the last three months. The short interest was 6.90% as of 10/14/2011.

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

Source: 10 Profitable Small Caps Falling On Market Fears