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Companies at the small cap stock stage still have a lot to prove to demonstrate they have what it takes to make it to the next level. With this in mind, we searched for small cap stocks that have attributes that weigh in favor of their potential for growth. The qualities we searched for today were low debt and profitability. The combination of these traits point to a company with strong financial controls and oversight. When debt is kept to a minimum and the company is generating strong profits, it can focus on growth. We think you will find the list of small cap stocks we found rather interesting.

The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company'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 companies that are improving profitability over time and managing the economic landscape better than competitors.

Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. This metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.

We first looked for small cap stocks. We then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1). We then screened for businesses with strong profit margins (1-year operating margin>15%)(ROE [TTM]>30%). We did not screen out any sectors.

Do you think these small-cap stocks should be priced higher? Use our list along with your own analysis.

1) Manhattan Associates, Inc. (NASDAQ:MANH)

IndustryApplication Software
Market Cap$1.01B

MANH stock chart

Key Metrics

Long Term Debt/Equity Ratio0.00
Operating Profit Margin21.14%
Return on Equity30.52%
Short Interest3.88%

Manhattan Associates, Inc. develops, sells, deploys, services, and maintains supply chain software solutions for the planning and execution of supply chain activities. It offers Manhattan SCOPE and Manhattan SCALE, which are platform-based supply chain software solutions. The company's Manhattan SCOPE is a portfolio of supply chain solution suites that include event and schedule tracking; alerts and notifications; inventory, order, and shipment visibility; cost monitoring and tracking; leading-edge analytics; and reporting with graphical depictions of critical supply chain performance metrics. Manhattan SCOPE also includes X-Suite solutions comprising flow management and extended enterprise management.

The company's Manhattan SCALE is a portfolio of logistics execution solutions that offer trading partner management, yard management, optimization, warehouse management, and transportation execution services. Manhattan Associates, Inc. also offers professional services, including planning and implementation services; and customer support, software enhancement, and training services. In addition, it sells computer hardware, radio frequency terminal networks, radio frequency identification chip readers, bar code printers and scanners, and other peripherals. The company serves retailers, distributors, wholesalers, manufacturers, grocery stores, life sciences companies, government, and other organizations. It operates in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Manhattan Associates, Inc. was founded in 1990 and is headquartered in Atlanta, Georgia.


IndustryApplication Software
Market Cap$930.88M

EGOV stock chart

Key Metrics

Long Term Debt/Equity Ratio0.00
Operating Profit Margin21.28%
Return on Equity32.53%
Short Interest4.14%

NIC Inc. provides eGovernment services that enable governments use the Internet to provide various services to businesses and citizens in the United States. It operates in two segments, Outsourced Portals, and Other Software and Services. The Outsourced Portals segment enters into long-term contracts with governments to design, build, and operate Internet-based enterprise-wide portals on their behalf. These portals consist of Websites and applications that enable businesses and citizens to access government information online and complete transactions, including applying for a permit, retrieving driver's history records, and filing a government-mandated form or report.

The Other Software and Services segment is involved in the software development and services to state and local governments, and federal agencies; development and management of the national motor carrier pre-employment screening program; design and development of online campaign expenditure and ethics compliance systems for federal and state government agencies. The company also provides consulting, application development, and portal management services to governments. NIC Inc. was founded in 1991 and is headquartered in Olathe, Kansas.

3) American Public Education, Inc. (NASDAQ:APEI)

IndustryBusiness Services
Market Cap$608.29M

APEI stock chart

Key Metrics

Long Term Debt/Equity Ratio0.00
Operating Profit Margin22.22%
Return on Equity32.68%
Short Interest20.36%

American Public Education, Inc., together with its subsidiary, American Public University System, Inc., provides online postsecondary education focusing on the needs of the military and public service communities. The company operates through two universities, American Military University and American Public University serving approximately 110,000 students in the United States and internationally. The universities share a common faculty and curriculum, which includes 87 degree programs and 69 certificate programs in disciplines related to national security, military studies, intelligence, homeland security, criminal justice, technology, business administration, education, nursing, and liberal arts. The company was founded in 1991 and is headquartered in Charles Town, West Virginia.

4) BP Prudhoe Bay Royalty Trust (NYSE:BPT)

SectorBasic Materials
IndustryOil & Gas Refining & Marketing
Market Cap$1.89B

BPT stock chart

Key Metrics

Long Term Debt/Equity Ratio0.00
Operating Profit Margin99.51%
Return on Equity37377.62%
Short Interest3.14%

BP Prudhoe Bay Royalty Trust operates as a grantor trust in the United States. The company holds overriding royalty interests constituting a non-operational interest in minerals in the Prudhoe Bay oil field located on the North Slope in Alaska. The Prudhoe Bay field extends approximately 12 miles by 27 miles and contains approximately 150,000 gross productive acres. As of December 31, 2011, its estimated net remaining proved reserves were 82.304 million barrels of oil and condensate, of which 73.476 million barrels were proved developed reserves, and 8.828 million barrels were proved undeveloped reserves. The company was founded in 1989 and is based in Austin, Texas.

5) Corporate Executive Board Co. (NYSE:CEB)

IndustryManagement Services
Market Cap$1.56B

CEB stock chart

Key Metrics

Long Term Debt/Equity Ratio0.00
Operating Profit Margin20.95%
Return on Equity66.07%
Short Interest2.79%

The Corporate Executive Board Company provides data analysis, research, and advisory services to executives and professionals in the United States, Europe, and internationally. It analyses and documents corporate best practices for significant and pressing issues that members confront, and delivers through various channels, including Web-based resources, interactive workshops, live meetings, and published studies; and creates and maintains benchmarking assets with information, such as organizational structures, costs, and productivity, as well as member experience and service quality.

The company also provides tools and analysis that enable decision making and performance improvement; and networking opportunities for peer executives and professionals, which include services, such as online peer discussion groups, on-request advice, feedback, and perspectives, as well as executive education curriculum to executives and their teams, supported through E-learning resources. Its products and services focus on various corporate functions, including finance, corporate services, and corporate strategy; human resources; information technology; legal, risk, and compliance; sales, marketing, and communications, as well as serves the financial services industry and government agencies. The Corporate Executive Board Company was founded in 1979 and is headquartered in Arlington, Virginia.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/01/2012.

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

Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: 5 Profit Generating Small Cap Stocks With Minimal Debt