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 discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 165,000-member community is full of investors helping each other beat the market.

We'll enlist CAPS to screen for small-cap companies, and then we'll get the story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:

• A market cap between $100 million and $1 billion.
• A three-year revenue growth rate of at least 30%.
• 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 whether the numbers fail to tell the true story.

Opinions with the numbers
Below is a sample of stocks our screen returned.

Data and star rankings from CAPS as of May 31.

China Security & Surveillance Technology
Despite seeing significant pricing pressure from China Security & Surveillance's corporate customers, the company's first-quarter earnings jumped by 65% on strong demand in China. It recently booked several "e-city" contracts and forecasts more strong demand from its government customers. General Electric estimates that China will spend $60 billion over the next decade to upgrade its infrastructure with more advanced technology, and United Technologies (NYSE: UTX) also sees growth prospects for its security and other businesses in the country. Despite a real estate and manufacturing slowdown, United Tech's CEO said, "We've seen development move from the coastal areas to central and western China."

Will the migration of development help sustain domestic demand for China Security? With shares roughly 40% than where they started the year, many CAPS members have taken a bullish stance on the company, with 98% of the 1,481 members rating China Security & Surveillance Technology expecting it to beat the broader market.

JA Solar
JA Solar joined the list of other Chinese solar companies -- Renesola (NYSE: SOL) and Trina Solar (NYSE: TSL) -- in reporting rising first-quarter sales and strong future outlooks. But a large amount of uncertainty surrounds the solar sector, not the least of which involves German subsidy cuts and financial troubles in Europe that threaten the stability of the region and the euro. But with JA Solar seeing strong demand from all of its markets and an expectation that it will continue through the year, many CAPS members still believe the stock is a good bet, with 95% of the 1,451 CAPS members rating JA Solar giving it the thumbs-up.

Gulf Resources
CAPS members think Gulf Resources' strong fundamentals and a solid position in its markets will ultimately lead to a market-beating investment. The strong demand and limited supply for bromine has continued to push selling prices higher, and the expansion of its end user markets is expected to help its pricing strength continue. Gulf Resources reported a 26% increase in first-quarter revenue and followed it up with a 22% jump in earnings, while demand for its oil and gas exploration chemicals helped boost its chemical-products segment. 

The company expects to begin producing wastewater-treatment chemical additives in the near future -- an addition that will also contribute to revenue -- and it looks to put its cash to use by buying more bromine production assets this year. In CAPS, 93% of the 288 members rating Gulf Resources expect it to outrun the S&P.

Let 165,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen. But individual investors are still the best judges of what to do with their own money. Fools should always perform their own due diligence.

It's easy to chime in with your own opinion. If you agree that these companies present dream opportunities -- or even if you see more of a nightmare instead -- simply scroll down and add your thoughts in the comments box.