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Digging through the small-cap space is always an interesting activity, because we never know what interesting things we might find. Even better, sometimes investors can find out-of-favor stocks that still have sound or improving operating margins, which could be an indication that things are turning around sooner than expected. The take-away is that often to find a potential diamond in the rough or a great turnaround story, investors really need to dig through the less high profile areas of the market. The Operating Profit Margin is a profitability ratio that measures the effectiveness of the firm’s operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the firm’s margin is increasing over time this means that it’s earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify firms that are improving profitability over time and managing the economic landscape better than competitors.

We first looked for small cap stocks trading near their 52-week lows. From this narrowed list of candidates we then looked for companies have been able to continue posting strong profitability (operating profit margin>30%). We did not screen out any sectors or market caps.

The list is ranked from highest to lowest by the operating profit margin:

1. Safe Bulkers, Inc. (SB)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$475M

Beta

1.94

The company Safe Bulkers (SB), Inc. provides marine drybulk transportation services worldwide. SB has a 1-year fiscal operating profit margin of 77.65% & is trading 27.64% above its 52-week low. The short interest was 1.60% as of 10/14/2011.

2. Getty Realty Corporation. (GTY)

Sector

Real Estate

Industry

REIT - Retail

Market Cap

$531M

Beta

1.13

The company operates as a real estate investment trust (REIT) in the United States. GTY has a 1-year fiscal operating profit margin of 62.12% & is trading 19.46% above its 52-week low. The short interest was 8.20% as of 10/14/2011.

3. Pioneer Southwest Energy Partners (PSE)

Sector

Energy

Industry

Oil & Gas E&P

Market Cap

$906M

Beta

0.38

The company engages in the ownership and acquisition of oil and natural gas properties in the United States. PSE has a 1-year fiscal operating profit margin of 58.16% & is trading 29.62% above its 52-week low. The short interest was 1.50% as of 10/14/2011.

4. Universal Health Realty. (UHT)

Sector

Real Estate

Industry

REIT - Healthcare Facilities

Market Cap

$484M

Beta

0.63

The company operates as a real estate investment trust (REIT) in the United States. UHT has a 1-year fiscal operating profit margin of 52.99% & is trading 19.91% above its 52-week low. The short interest was 3.90% as of 10/14/2011.

5. Diana Shipping, Inc. (DSX)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$687M

Beta

1.62

The company is a shipping transportation services. It transports dry bulk cargoes that include commodities, such as iron ore, coal, grain, and other materials along worldwide shipping routes. DSX has a 1-year fiscal operating profit margin of 48.52% & is trading 25.95% above its 52-week low. The short interest was 1.90% as of 10/14/2011.

7. Seaspan Corporation. (SSW)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$871M

Beta

0.89

The company owns and operates the containerships that are engaged in the deep-sea container transportation business in Hong Kong. SSW has a 1-year fiscal operating profit margin of 46.62% & is trading 27.52% above its 52-week low. The short interest was 2.40% as of 10/14/2011.

8. Knightsbridge Tankers, Ltd. (VLCCF)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$426M

Beta

0.76

The company engages in the seaborne transportation of crude oil and dry bulk cargoes worldwide. VLCCF has a 1-year fiscal operating profit margin of 45.01% & is trading 15.35% above its 52-week low. The short interest was 9.50% as of 10/14/2011.

9. National CineMedia, Inc. (NCMI)

Sector

Consumer Cyclical

Industry

Marketing Services

Market Cap

$664M

Beta

0.42

The company operates a digital in-theatre network in North America. NCMI has a 1-year fiscal operating profit margin of 44.58% & is trading 18.2% above its 52-week low. The short interest was 5.00% as of 10/14/2011.

10. IRSA Investments and Represent. (IRS)

Sector

Real Estate

Industry

Real Estate - General

Market Cap

$583M

Beta

1.32

The company engages in a range of diversified real estate related activities in Argentina. IRS has a 1-year fiscal operating profit margin of 40.79% & is trading 24.54% above its 52-week low. The short interest was N/A as of 10/14/2011.

We hope this list helps as investors do their own due diligence on small cap stocks. *Company profiles were sourced from Finviz.

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

Source: 9 Small Cap Stocks With Strong Profits Trading Near 52-Week Lows