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Are you diversified across all market-cap sectors? For a closer look into the small-cap sector, we ran a screen you may be interested in.

We began by screening small-cap stocks, with market caps between $300 million and $1 billion, for those that appear undervalued relative to earnings growth, with PEG below 1.

We then screened these names for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks are being undervalued? Use this list as a starting point for your own analysis.

List sorted by difference between pretax profit margin and industry average.

1. CEVA Inc. (NASDAQ:CEVA): Engages in designing and licensing silicon intellectual property (SIP) for the handsets, portable multimedia, and consumer electronics markets. Market cap at $498.52M, most recent closing price at $21.67. PEG at 0.98. TTM gross margin at 94.93% vs. industry average at 60.23%. TTM operating margin at 30.81% vs. industry average at 22.62%. TTM pretax margin at 35.64% vs. industry average at 20.96%.

2. OYO Geospace Corp. (OYOG): Engages in designing and manufacturing instruments and equipments used in the acquisition and processing of seismic data; and in the characterization and monitoring of producing oil and gas reservoirs. Market cap at $735.1M, most recent closing price at $114.55. PEG at 0.66. TTM gross margin at 47.97% vs. industry average at 34.07%. TTM operating margin at 26.12% vs. industry average at 18.16%. TTM pretax margin at 26.34% vs. industry average at 13.8%.

3. RealD Inc. (NYSE:RLD): Licenses stereoscopic three-dimensional or 3D technologies internationally. Market cap at $653.02M, most recent closing price at $11.83. PEG at 0.96. TTM gross margin at 61.76% vs. industry average at 35.96%. TTM operating margin at 17.48% vs. industry average at 9.52%. TTM pretax margin at 17.17% vs. industry average at 10.52%.

4. Electro Rent Corp. (NASDAQ:ELRC): Engages in the rental, lease, and sale of new and used electronic test and measurement equipment. Market cap at $391.76M, most recent closing price at $16.31. PEG at 0.97. TTM gross margin at 61.73% vs. industry average at 35.96%. TTM operating margin at 14.85% vs. industry average at 9.52%. TTM pretax margin at 16.4% vs. industry average at 10.52%.

5. Zygo Corporation (NASDAQ:ZIGO): Designs, develops, and manufactures ultra-high precision measurement solutions to enhance its customers' manufacturing yields; and optical sub-systems and components for original equipment manufacturers and end-user applications in the United States and internationally. Market cap at $357.48M, most recent closing price at $19.71. PEG at 0.87. TTM gross margin at 52.23% vs. industry average at 35.96%. TTM operating margin at 17.1% vs. industry average at 9.52%. TTM pretax margin at 16.32% vs. industry average at 10.52%.

*Profitability data sourced from Fidelity, all other data sourced from Finviz.

Source: 5 Undervalued Small Caps With Impressive Profitability