With the close of Q2 earnings season, we decided run a screen on small-cap stocks that released earnings this past month, writes James Dennin on Kapitall.com.

We looked for signs undervaluation as indicated by a stock's Graham number. Next we screened for low debt to equity ratios, and looked for other potential growth indicators—such as earnings surprises.

The Graham number is calculated by looking at the square root of earnings per share (EPS)  multiplied by book value per share (BVPS) and 22.5, which is based on Graham’s assertion that a price-to-earnings ratio should never be above 15 and a price-to-book ratio should not be over 1.5.

Book value per share is an important metric to consider when looking at how a stock is performing in a given moment, because it looks at both inflow (assets coming in, such as retained earnings) and outflow (dividends and buy-backs). Graham's equation attempts to quantify what a stock is really worth by looking at BVPS alongside numbers that measure a stock's profitability, in light of its price.

Among our results, Kelly Services (KELYA) beat analyst estimates by $.07, posting earnings per share (EPS) of $0.33 this quarter. At $18.61 the company is trading well below its 52-week high of $19.96, although its CAO recently sold off 1,300 shares of his stake.

Meanwhile luxury spending took a major hit as a result of the recession, and isn't recovering as fast as economists had hoped. Another stock on our list, Inter Parfums Co. (IPAR), has seen a downgrade of its average price target to $33.00, likely due to troubles that have hit the international fragrance industry as a whole. But the company has undeniably strong financials, with low debt and earnings growth. This couples with a recent deal-termination with Burberry—which added $236 million to their balance sheet—in time to beef up development for the holiday season.

Tesco Corporation (TESO) is also undervalued by our screen, despite a 38.4% yearly return and a number of prominent analyst upgrades, with some projecting a price target as high as $18.00. The company, which develops upstream energy solutions, has beaten expectations for EPS, despite a slight dip in revenue.

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1.Almost Family Inc. (AFAM): Provides home health services in the United States. Market cap at $178.73M, most recent closing price at $19.28. Diluted TTM earnings per share at 1.45, and a MRQ book value per share value at 22.7, implies a Graham number fair value = sqrt (22.5*1.45*22.7) = $27.21. Based on the stock's price at $19.54, this implies a potential upside of 39.27% from current levels.

2.Eastern Insurance Holdings, Inc. (EIHI): Provides workers compensation insurance and reinsurance products in the United States. Market cap at $162.2M, most recent closing price at $21.45. Diluted TTM earnings per share at 1.59, and a MRQ book value per share value at 18.62, implies a Graham number fair value = sqrt (22.5*1.59*18.62) = $25.81. Based on the stock's price at $21.94, this implies a potential upside of 17.64% from current levels.

3.Flexsteel Industries Inc. (FLXS): Flexsteel Industries, Inc., together with its subsidiaries, manufactures, imports, and markets residential and commercial upholstered and wooden furniture products in the United States. Market cap at $159.17M, most recent closing price at $22.45. Diluted TTM earnings per share at 1.83, and a MRQ book value per share value at 20.77, implies a Graham Number fair value = sqrt (22.5*1.83*20.77) = $29.24. Based on the stock's price at $25.13, this implies a potential upside of 16.37% from current levels.

NEXT PAGE: 8 More Undervalued Small-Cap Stocks

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4.INTL FCStone Inc. (INTL): Provides execution, clearing, and advisory services in commodities, capital markets, currencies, and asset management worldwide. Market cap at $360.82M, most recent closing price at $19.63. Diluted TTM earnings per share at 1.32, and a MRQ book value per share value at 17.4, implies a Graham number fair value = sqrt (22.5*1.32*17.4) = $22.73. Based on the stock's price at $19.14, this implies a potential upside of 18.77% from current levels.

5.Inter Parfums Inc. (IPAR): Engages in the manufacture, marketing, and distribution of various fragrances and fragrance related products primarily in the United States and Europe. Market cap at $863.71M, most recent closing price at $28.09. Diluted TTM earnings per share at 4.7, and a MRQ book value per share value at 13.22, implies a Graham number fair value = sqrt (22.5*4.7*13.22) = $37.39. Based on the stock's price at $29.98, this implies a potential upside of 24.72% from current levels.

6.Kelly Services, Inc. (KELYA): Provides workforce solutions to various industries worldwide. Market cap at $693.78M, most recent closing price at $18.65. Diluted TTM earnings per share at 1.27, and a MRQ book value per share value at 20.9, implies a Graham number fair value = sqrt (22.5*1.27*20.9) = $24.44. Based on the stock's price at $19.38, this implies a potential upside of 26.1% from current levels.

7.Insight Enterprises Inc. (NSIT): Provides information technology (IT) hardware, software, and service solutions to businesses and public sector clients. Market cap at $894.96M, most recent closing price at $20.88. Diluted TTM earnings per share at 1.7, and a MRQ book value per share value at 15.83, implies a Graham number fair value = sqrt (22.5*1.7*15.83) = $24.61. Based on the stock's price at $21.05, this implies a potential upside of 16.9% from current levels.

8.PC Connection, Inc. (PCCC): Operates as a direct marketer of various information technology solutions. Market cap at $400.53M, most recent closing price at $15.33. Diluted TTM earnings per share at 1.28, and a MRQ book value per share value at 11.81, implies a Graham number fair value = sqrt (22.5*1.28*11.81) = $18.44. Based on the stock's price at $15.65, this implies a potential upside of 17.84% from current levels.

9.ProAssurance Corporation (PRA): Provides professional liability insurance products primarily to physicians, dentists, other healthcare providers, and healthcare facilities in the United States. Market cap at $3.B, most recent closing price at $48.48. Diluted TTM earnings per share at 5.24, and a MRQ book value per share value at 37.79, implies a Graham number fair value = sqrt (22.5*5.24*37.79) = $66.75. Based on the stock's price at $49.77, this implies a potential upside of 34.12% from current levels.

10.Skullcandy, Inc. (SKUL): Develops and distributes headphones and other audio accessories to retailers in the United States and to distributors in various countries worldwide. Market cap at $152.73M, most recent closing price at $5.51. Diluted TTM earnings per share at 0.36, and a MRQ book value per share value at 4.91, implies a Graham number fair value = sqrt (22.5*0.36*4.91) = $6.31. Based on the stock's price at $5.45, this implies a potential upside of 15.71% from current levels.

11.Tesco Corporation (TESO): Engages in the design, manufacture, and service delivery of technology based solutions for the upstream energy industry worldwide. Market cap at $586.77M, most recent closing price at $15.05. Diluted TTM earnings per share at 1.05, and a MRQ book value per share value at 12.6, implies a Graham number fair value = sqrt (22.5*1.05*12.6) = $17.25. Based on the stock's price at $14.99, this implies a potential upside of 15.1% from current levels.

Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.

By James Dennin of Kapitall.com