Dream Stocks for Small-Cap Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were. But for my part, I'm more interested in the tools that can not only help me find new stock ideas, but also have the resources necessary to evaluate tomorrow's greatest companies.

There is a tool that offers a variety of resources to help with finding tomorrow's leaders: Motley Fool CAPS, a 120,000-member community of investors helping each other beat the market.

We've enlisted CAPS to screen for small companies and get the story behind some of the more highly rated stocks. CAPS' nifty screener helped us find stocks with:

• A market cap between $100 million and $1 billion.
• A three year revenue growth rate of at least 20%.
• A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or if the numbers fail to tell the true story.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today:

Data and star rankings from CAPS. All data as of November 7.

ChinaMedical Technologies
Several strong trends make China Medical a fast grower, the most notable being a huge population with increasing means to access health-care services. Like Chinese peers Mindray Medical (NYSE:MR) and 3SBio, China Medical had a solid quarter recently, building upon its consistently high revenue growth and increasing net income.

While China Medical’s strong fundamentals may be enough for some investors, its prospects for future growth have also captivated many CAPS members. The company’s move to buy a human papillomavirus (HPV) detection system from Molecular Diagnostic Technologies for $345 million opens up a vast new market. Based on the number of women that should be receiving cervical cancer tests in China, it estimates that revenue could reach $700 million per year from the system. With all the potential packed in Chinese health care, more than 97% of the 1,166 CAPS members rating China Medical Technologies expect it to outperform the market.

Vaalco Energy
Like other energy-focused companies Rowan Companies (NYSE:RDC) and Nabors Industries (NYSE:NBR), the market has knocked independent energy company Vaalco's shares down significantly from their peak, which some see as a good opportunity to get a piece of a promising small cap.

Vaalco followed up a solid second quarter with another great performance in its third quarter. Higher oil prices and crude volumes helped produce a net income of $22.3 million, more than double the $8.8 million reported a year ago, and revenue grew to $55.5 million. The company has plans for seven more development and exploration wells, and CEO Robert L. Gerry says its exploration program is growing at one of the fastest rates in its history. More than 97% of the 1,477 CAPS members rating Vaalco Energy expect it to outperform the market.

Clean Energy Fuels
Many CAPS members agree with T. Boone Pickens and anticipate a growing need for natural gas as a clean energy source for transportation. No wonder, then, that they have high hopes for his company that is poised to grow by supplying compressed and liquid natural gas solutions for vehicle fleets.

Clean Energy was a big supporter of California Proposition 10, which would have used public funding for clean energy projects, but the measure was voted down. However, the company said that though the proposition would have helped, it didn’t reduce any of its opportunities for growth. With E&Ps like Chesapeake Energy and Ultra Petroleum (NYSE:UPL) having no foreseeable problems in continuing to pull gas from the ground any time soon, many investors believe there will be adequate supply for infrastructure firms like Clean Energy to build upon. More than 96% of the 750 CAPS members rating Clean Energy Fuels expect it to outperform the market.

Let 120,000 investors be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.

Run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.

Growth prospects for Mindray Medical have made it a recommendation of the Motley Fool Rule Breakers service. To see all the stocks that have the service beating the market by three points on average, take a free 30-day trial today.