It’s been tough sledding for stocks. The Dow Jones Industrial Average (DJIA) has dropped at least 100 points on four separate trading days so far in May, bringing a wide array of stocks down from recent highs. Lost in the negative price action is a bit of bright news: Some companies posted very robust quarterly results this month, presenting investors with a chance to snap up shares while most are in “sell” mode.

I went searching for the small-cap stocks (which I define as having market values between $200 million and $1.5 billion) that delivered scorching results (exceeding consensus profit forecasts by at least 25%), yet still trade for less than the market multiple (the average stock in the S&P 500 trades for around 15 times projected 2012 profits). To make sure the stocks in my screen are sufficiently liquid (and hence not subject to wild price swings due to low trading volume), I narrowed the list to stocks that trade at least 150,000 shares a day, on average.

 

Of this list, three stocks caught my attention. Here’s why…

1. Energy Solutions (NYSE: ES)
As Japan wrestles with a continuing nuclear crisis, nuclear energy advocates in the United States are getting cold feet. Many had begun to support a new round of nuclear power plants to help reduce dependence on imported oil, but after the Japanese nuclear disaster that evolved in the aftermath of a major earthquake and tsunami that hit Japan in March, that support is quickly disappearing. As a result, nuclear-related stocks have fallen out of favor. [See StreetAuthority contributor Steven Orlowski’s recent article on this topic.]

But this company shouldn’t be painted with the same brush.

Energy Solutions actually helps take old nuclear power plants apart after they have been taken out of service, in a process known as de-commissioning. With more than 100 U.S. nuclear power plants set for closure within the next two decades, the company is likely to see ample opportunities. (Many of these plants were built more than 30 years ago and have already exceeded their originally-planned life spans.)

De-commissioning can be profitable work. Energy Solutions just delivered strong first-quarter profits, thanks to impressive margins generated for these services. The company expects to generate at least $130 million in earnings before interest, taxes, depreciation and amortization (EBITDA) this year, though it is valued at less than $500 million.

Energy Solutions’ EBITDA could be even more robust next year, as the company winds down an unprofitable major program in the U.K. Analysts at Sterne Agee expect operating margins to expand 140 basis points to 8.2% in 2012. This could boost EBITDA closer to $160 million. Part of the margin gain is also coming from China, where the company is helping establish nuclear storage areas to handle processed fuel at several new Chinese nuclear plants. Between de-commissioning in the United States and new construction in China, Energy Solutions is shaping up to be a stronger profit play than many are expecting.

2. Chiquita Brands (NYSE: CQB)
Consumers know the Chiquita name a lot better than Wall Street. The purveyor of bananas and packaged produce has been undergoing an impressive turnaround, even as shares have barely moved up from 12 months ago. A pair of factors is helping turn Chiquita into a very profitable company. First, the company has considerable exposure to Europe, where demand for bananas is strong and the firming euro helps keep prices stable. Second, the company has started to tighten its cost base, leading to solid year-over-year gains in its bottom line.

In the most recent quarter, Chiquita’s sales rose $16 million from a year ago, but its cost of goods sold dropped by $18 million. That $34 million gross margin gain went straight to the bottom line, helping the company earn $0.52 a share, its best first-quarter showing in nearly a decade. Per-share profits in the seasonally strong second quarter could approach $1.50, and full-year earnings-per-share (EPS) forecasts of around $2 in 2011 and 2012 now look far too conservative.

Shares have been partially weighed down by a large debt load, which was a serious concern when Chiquita was unprofitable for a string of years in the middle of the last decade. But rising profits are helping bring debt down — long-term debt is on track to fall from $766 million in 2008 to around $550 million by the end of this year.

This may never be a fast-growing business model, but surging profits and falling loan balances may help shares move from a current $15 to north of $20, granted the company maintains its tight cost controls.

3. AirCastle (NYSE: AYR)
I’d be remiss if I failed to once again mention this aircraft-leasing firm. I’ve noted on several occasions that shares sell for less than book value. So when the company also appears on a screen of solid profit generators, it’s a sign the stock deserves more attention. Shares currently trade for around 10 times projected 2012 consensus forecasts, though this outlook now looks conservative and, as a result, the forward multiple is likely in the high single-digits.

The fact shares still trade well below tangible book value is just icing on the cake. Shares have pulled back in this challenging market to less than $12, though they should eventually move into the upper teens once the gap between the current market value and projected year-end book value is closed.

Action to Take –> Most of these stocks have failed to rally in the face of strong first-quarter results simply because the broader stock market is attracting little buying interest right now. As a result, this may be a great time to research these names heavily, as they are likely solid upside candidates when buyers return to the market.