The Russell 2000 Index, which is comprised of companies with small market capitalizations, is always seen as a solid proxy on the domestic economy. Smaller companies, which typically have market values between $300 million and $2 billion, tend to see business turn up at a solid clip when corporate and consumer spending begins to rebound.

I went in search of some of the greatest growth stories among small cap stocks, seeking out firms expected to boost profits at a decent clip in 2011 and at least 150% in 2012. To winnow the list, I also wanted to focus on stocks that are actively traded (with at least 300,000 shares traded daily), and lastly, they should be reasonably priced. All the stocks on the list had to trade for less than 18 times projected 2012 profits. The criteria helped me shrink the list from 383 candidates to the 17 you see below. (Note that not all of these companies are actual members of the Russell 2000 Index).

Rising energy prices account for some of the names in this group. For example, Willbros Group (NYSE: WG), which provides construction and engineering services to the oil and gas sector, is just emerging from a tough downturn but expects to see business pick up sharply in coming quarters. Carrizo Oil & Gas (Nasdaq: CRZO) is tapping a range of new oil and gas fields, leading analysts to expect the company to boost output 40% this year. Firm energy prices should help Carrizo generate strong profits this year and into 2012. In a similar vein, Goodrich Petroleum’s (NYSE: GDP) energy fields have proven to have a lot more oil than many had expected. Profit forecasts have jumped sharply in the last 90 days.

Opportunities also abound in other sectors, including these two up-and-coming profit machines.

Arkansas Best (Nasdaq: ABFS)
The economic slowdown really hit trucking firms hard. Lower volume and high fixed costs even pushed some players such as YRC Worldwide (Nasdaq: YRCW) close to bankruptcy. The good news: these firms were forced to radically lower costs, and now that the economy is getting stronger, their profit pictures are getting much brighter.

I looked at Arkansas Best’s improving outlook last summer, though I was a bit early, as shares haven’t moved much since then. In fact, first quarter results were disappointing because the recent spike in energy prices came too quickly for the company to implement fuel surcharges.

Those cost pass-throughs are now in place, and the bullish scenario remains firmly intact. Despite the weather and energy-related variables that hurt first-quarter results, “volumes remain robust and pricing is improving,” note analysts at Sterne Agee, who see shares rising from a current $23 to $33 — a gain of about 43%. The analysts add “there are a number of near-term catalysts that bear watching, all with upside implications.”

For the long haul, it’s all about profits. Arkansas Best is expected to reach break-even by the June quarter and could really see profits surge as we head into 2012, thanks to higher trucking volume and lower operating costs. (Arkansas Best is now carrying about 20% more freight than a year ago, no doubt aided by fewer rival trucks plying the roadways.) Per-share profits could triple in 2012 to around $1.40 and rise by a decent amount again in 2013, if the economy continues to rebound. By the middle of the decade, EPS (earnings per share) could handily exceed $3, which was routinely the case in the middle of the last decade.

KIT Digital (Nasdaq: KITD)
YouTube really got things going. Before long, everyone was accustomed to watching streaming video on their computers. But many enterprises were caught off guard, unable to quickly build out their own video capabilities that could be used in training, promotions, security, communications, etc. The fact that videos now need to be optimized for rapidly proliferating smartphones just adds to their headaches.

In response, many companies have been turning to firms like KIT Digital to help ensure that they’ve got the right hardware and software, and that it’s all properly configured. KIT has quickly emerged as a leading industry vendor, pushing sales from $23 million in 2008 to more than $100 million in 2010, a projected $200 million this year and perhaps $270 million in 2012.

Much of that growth is likely to be organic, but some is coming from acquisitions, which has enabled KIT to offer a broadening array of services to clients. For example, a September 2010 acquisition of Brickbox Digital Media gives the company exposure to the film industry, enabling film studios to more easily adapt their content to web-based and mobile platforms. KIT derives more than half its revenue from Europe, and results could well be aided by the ever-weakening dollar.

In early April, KIT completed its biggest and perhaps final acquisition for the near future. The company paid $63 million for Ioko, which provides a platform to transmit multiple video streams to cable and other media companies. Ioko’s robust platform is used by AT&T (NYSE: T), Disney (NYSE: DIS), Electronic Arts (Nasdaq: ERTS) and others.

Shares have barely budged on the news as investors wait and see how KIT will digest all of its recent acquisitions. A pair of analysts remains undeterred. Merriman Capital’s Richard Fetyko sees shares nearly doubling from $11 to around $20, which is also the target price of BGB Securities. Both firms believe KIT will find more appeal with investors once it has a few more quarters of digested operations under its belt.

Action to Take –> Whether it’s due to the rebounding economy or simply having exposure to the latest hot areas of technology, the two firms I profile above look poised to boost profits at a fast place in coming quarters. Give them a close look now before they pop up on more investors’ radars.