Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Will The Gods Smile This Reporting Season?

|Includes:JOUT, The Wet Seal, Inc. (WTSL)

Among the small-cap stocks ready to post their latest quarterly results this year, The Wet Seal, Inc. (NASDAQ: WTSL) and Johnson Outdoors Inc. (NASDAQ: JOUT) present opportunities. While one appears to be a diamond in the rough and could surprise if the previous quarter was any indication, the other one is simply undervalued and is set to continue its northward journey.

The Wet Seal, Inc. belongs to an industry which seems to have had its best days in the past, but struggles now. As a specialty retailer of apparel and accessory items for female customers, the company was also privy to disappointing results which almost drove the stock price into the ground. With 31 percent cut over the last six months, there is not much that excites about this stock. However, there are signs of a turnaround beneath the surface. In the last quarter, the company reported only a marginal improvement in top line, but returned to profitability from a loss of $12.4 million in the same period last year. Although the profits were slim at $1 million, it indicated the company's cost cutting program was working in the right direction. As such, the stock, which currently trades at a price by sales ratio of just 0.51, could move up sharply if the company posts better than expected results. The street has obviously not set high expectations from the company, which makes a potential case of share prices moving up after results.

Wisconsin based sporting goods manufacturer Johnson Outdoors Inc. presents a study in contrasts to The Wet Seal. With its profits soaring 51.8 percent in the most recent quarter, it is not surprising to see the stock moving up consistently. At a forward price earnings ratio of 13, the stock is surely undervalued from earnings growth potential. This is one of the benefits of a continuing restructuring in the U.S. and European operations of the Watercraft segment. The company has negligible debt and has recently started paying dividends. Starting from a low base, the dividend is only going to go up. In addition, Johnson Outdoors also replaced its revolving credit facility with a new loan agreement which has significantly fewer financial covenants and simplified reporting requirements. Given these advantages, the company can be expected to report another set of encouraging numbers, although a feeble top line growth remains a matter of concern. However, it is somewhat compensated by an excellent cost control.

Stocks: WTSL, JOUT