5 Top Micro-Cap Stocks

Hey there, Fools. We're back again to help you identify some of the most attractive microcap stocks worthy of your investment dollars. Just as a reminder, we do this because:

1. Underfollowed micro-cap companies offer great returns -- and sometimes even the best returns.
2. Wall Street is covering fewer stocks than ever before, making now a great time to start looking for tiny treasures.
3. Micro-cap stocks can burn if you don't do your homework, so we try to shed more light on the asset class for you.

Microscopic surgery
This column uses our Motley Fool CAPS community intelligence database to turn up promising stocks. The system asks amateur and professional investors alike to rate stocks either "outperform" or "underperform." In turn, each investor is rated, as is each stock.

The end result is that while only huge companies like Pfizer (NYSE:PFE) have more than 15 or 20 analysts following them, CAPS harnesses the ideas of thousands to get at the long tail of the stock market with the same depth of coverage.

Drumroll, please ...
So without further ado, here are five CAPS stocks sporting four or five stars, that have market caps between $100 million and $200 million, and that are covered by three or fewer professional analysts.

As always, don't view these stocks as hearty formal recommendations, but rather as appetizing starters for further analysis. Agreed?

Now that we have that settled, Nobel Learning Communities and Chelsea Therapeutics might just be a pair of small wonders worthy of your Foolish due diligence.

Nobel prized
This summer marks the third year that I've been out of school completely -- and I'm not missing a second of it. But, for the majority of customers at Nobel Learning Communities, the educational journey is just beginning.

Through a network of 145 schools in 13 states, Nobel Learning provides private-pay education for students ranging from preschool through grade 12. Nobel still has a relatively small number of CAPS ratings, but it might be beneficial to learn a quick lesson or two before other Fools start to sign up.

In its latest quarter, Nobel reported a 42% increase in net income on 17% revenue growth. Strong results of that nature have boosted the stock nearly 40% over the past year, but when you couple heavy recent insider buying (from three directors) with an EV/EBITDA multiple under 10, Nobel is something worth studying.

As scary as it sounds, a CAPS All-Star called ButtSauce looks to educate us further:

I was ready to give this one a verbal lashing, but actually it looks pretty good. I see plenty of room for growth ... check out the PEG and such. Book value, growth, and what they offer makes a pretty good case (for investment). Insiders are buying rather than selling.

Portfolio therapy
Chelsea Therapeutics is another stock in the long tail that piques the interest of our CAPS players. Normally I stay away from biopharmaceuticals, as they tend to be more speculative in nature, but Chelsea is interesting for a couple of reasons.

Like Nobel, Chelsea has lately been experiencing some heavy insider buying. Specifically, savvy investor Josiah Austin has been increasing his stake in the company, buying more than $3.5 million worth of shares last July alone. I'd have to do more research on Austin before taking a ride on his coattails, but his bet sure is big enough for me to investigate.

Also noteworthy is that Chelsea's lead product, Droxidopa (L-Dops) -- currently in phase 3 testing in the U.S. -- has already been approved in Japan and is being marketed there.

Of course, those two facts don't completely remove the speculative aspect of Chelsea, but they at least help. CAPS All-Star drugncover offers this therapeutic pitch:

Company is about to launch into Phase 3 testing for their lead drug. They just got orphan status which offsets a lack of patent, and with thousands of treated patients in Japan, the safety and efficacy has already been well established. ... Low risk biotech, product worth market cap of at least 200M (at 3x minimum sales) that nobody is watching ... equals good pick in my book!

Are we on the same micro-wavelength?
But, of course, the real question is whether you believe these companies are real micro marvels, or just small shrimps waiting to get squished. Log on to CAPS and let us know how you feel.

It's absolutely free, and within seconds you'll have access to thousands of potential stock ideas. Join now -- more teeny tiny treasures await discovery.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Pfizer is an Inside Value pick. The Fool's disclosure policy is never too small to be seen.