Interested in gaining exposure to the small-cap sector? For ideas on how to start your own small-cap search, we ran a screen.

We began by screening the small-cap sector for stocks with strong liquidity, with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

*Tool provided by* *Kapitall**.*

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

** 1. Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK):** Develops, manufactures, markets, and sells generic, prescription, over-the-counter, and nutritional products in liquid and semisolid dosage forms in the United States. Market cap at $363.16M, most recent closing price at $27.85. Current ratio at 6.94. Diluted TTM earnings per share at 3.84, and a MRQ book value per share value at 17.42, implies a Graham Number fair value = sqrt(22.5*3.84*17.42) = $38.80. Based on the stock's price at $27.85, this implies a potential upside of 39.3% from current levels.

** 2. Ennis Inc. (NYSE:EBF):** Engages in the production and sale of business forms, other business products, and apparel. Market cap at $367.41M, most recent closing price at $14.05. Current ratio at 4.4. Diluted TTM earnings per share at 1.21, and a MRQ book value per share value at 13.88, implies a Graham Number fair value = sqrt(22.5*1.21*13.88) = $19.44. Based on the stock's price at $14.05, this implies a potential upside of 38.36% from current levels.

** 3. FutureFuel Corp. (NYSE:FF):** Engages in the manufacture and sale of specialty chemicals and bio-based products primarily in the United States. Market cap at $373.12M, most recent closing price at $9.03. Current ratio at 6.28. Diluted TTM earnings per share at 0.94, and a MRQ book value per share value at 7.08, implies a Graham Number fair value = sqrt(22.5*0.94*7.08) = $12.24. Based on the stock's price at $9.03, this implies a potential upside of 35.51% from current levels.

** 4. Threshold Pharmaceuticals Inc. (NASDAQ:THLD):** Engages in the discovery and development of drugs targeting the microenvironment of solid tumors for patients living with cancer. Market cap at $377.14M, most recent closing price at $6.92. Current ratio at 5.79. Diluted TTM earnings per share at -2.69, and a MRQ book value per share value at -1.43, implies a Graham Number fair value = sqrt(22.5*-2.69*-1.43) = $9.30. Based on the stock's price at $6.92, this implies a potential upside of 34.44% from current levels.

** 5. IXYS Corp. (NASDAQ:IXYS):** Engages in the development, manufacture, and marketing of power semiconductors, advanced mixed signal integrated circuits, application specific integrated circuits, and systems and radio frequency semiconductors. Market cap at $315M, most recent closing price at $10.08. Current ratio at 6.07. Diluted TTM earnings per share at 0.93, and a MRQ book value per share value at 8.12, implies a Graham Number fair value = sqrt(22.5*0.93*8.12) = $13.03. Based on the stock's price at $10.08, this implies a potential upside of 29.32% from current levels.

** 6. National Presto Industries Inc. (NYSE:NPK):** Engages in the production and sale of housewares/small appliances, defense products, and absorbent products in North America. Market cap at $460.96M, most recent closing price at $67.0. Current ratio at 4.87. Diluted TTM earnings per share at 6.69, and a MRQ book value per share value at 44.31, implies a Graham Number fair value = sqrt(22.5*6.69*44.31) = $81.67. Based on the stock's price at $67., this implies a potential upside of 21.89% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

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