5 Top Micro-Cap Stocks

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

1. Underfollowed micro-cap companies offer great returns -- 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 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 Intel (NASDAQ:INTC) 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 that sport ratings of four or five stars (out of five), have market caps between $100 million and $300 million, and are covered by fewer than five professional analysts.

Data from Yahoo! Finance and Motley Fool CAPS.

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

Now that we have that settled, CEVA and Matrixx Initiatives might be a pair of small wonders worthy of your Foolish due diligence.

Semi-stardom
There are a number of ways to play the growth of Internet video, but California-based CEVA is probably one of the less obvious. Only 41 CAPS All-Stars have so far rated the licensor of silicon solutions, and each one of them likes it to outperform.

Take a quick stroll through CEVA's CAPS page, and you'll find bullish arguments centered on its IP business model, strong earnings momentum, and exposure to the growing use of multimedia gadgets. In the latest quarter, CEVA posted record sales and profits, while signing three new agreements for its technologies, so the stock might be a timely bet.

With about $4.25 in cash per share, insignificant debt, and a PEG below 1, CEVA might even be a nicely priced one, as well.

Last September, CAPS player luh summed it up:

Ceva licenses digital-signal-processing (DSP) technology to chipmakers, who counts Infineon (NYSE:IFX), LG and Nokia (NYSE:NOK) as its clients. While riding the iphone waves, CEVA also expands into home entertainment field with licensing deals for digital TVs, blue-ray discs and set-top boxes.

Step into the Matrixx
Matrixx Initiatives, an Arizona-based producer of over-the-counter health-care products, is another stock in the long tail that piques the interest of our community. Fifty-three of the 54 CAPS All-Stars who've rated the stock are bullish.

Particularly, Fools rave about how effectively the company's Zicam-branded products (nasal sprays, gels, and chewable pills) seem to knock out annoying coughs and colds. One CAPS All-Star, ElRemaro, even found some of the products to "provide more relief from the common cold ... than any other remedy I have used in my 63 years." Financially, the company is no slouch, either, consistently posting industry-topping margins and double-digit returns on capital.

Finally, Fools like the valuation: The stock is down about 18% over the last year and currently trades at a paltry PEG of 0.55. 

In March, CAPS player GCBECKWITH took a look at the big picture:

With the health care costs continuing to rise, I believe the over-the-counter markets are going to boom, especially if the pessimistic outlook of companies offering less health care benefits turn out to be true. I already know people who opt to try over-the-counter medications instead of going to the doctor because their co-pay is more than they can afford.

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 onto 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.