While the market is hung up on what will happen in the Middle East and when the Federal Reserve will back off its loose monetary policy, many small companies are still growing earnings at significant rates.

One such company is a small footwear and apparel company that is discovering new product channels as a way to increase sales. Rocky Brands (NASDAQ: RCKY) has the highest earnings per share (EPS) growth rate in the footwear industry. The company just posted EPS growth of 700 percent in its recent quarter.

Nonetheless, the stock is undervalued and trades at a price-to-earnings (P/E) ratio of only 11. Due to strong sales, EPS growth and cheap valuation, Rocky Brands has 50 percent price appreciation potential in the next year.

Rocky Brands is a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well-recognized brand names including Rocky, Georgia Boot, Durango, Lehigh, and the licensed brand Michelin Footwear.

For the second quarter of 2013, net sales increased 33.8 percent to $59.4 million versus net sales of $44.4 million for the second quarter of 2012. Net income increased 700 percent to $1.8 million, or $0.24 in EPS, for the second quarter of 2013, versus net income of $0.2 million, or $0.03 in EPS, for the second quarter of 2012.

For the first six months of 2013, net sales increased 15.8 percent to $113.1 million versus net sales of $97.7 million in the first half of 2012. Net income increased 170 percent to $2.7 million, or $0.35 in EPS, for the first half of 2013, versus net income of $0.9 million, or $0.13 in EPS, for the first half of 2012.

The second quarter marked the third consecutive quarter of positive sales growth for the retail division. The company continues to make important progress transitioning the majority of its Lehigh business-to-business (B2B) operations to the Internet.

Orders on the company’s websites were up 65 percent from Q2 last year and are expected to see similar trends over the next couple of quarters. Currently, 78 percent of all B2B sales for the company are through web or catalog versus 65 percent for the same period a year ago.

The company has increased productivity in the direct to consumer eCommerce channel by investing in more resources to drive traffic to its Rocky, Georgia and Durango websites. It also added features such as product videos and enhanced search functionality to improve the consumer experience and increase conversion rates.

Rocky Brands is a small cap stock with a market cap of only $118 million. However, the current enterprise value of the stock is $147 million, meaning the stock trades at 80 percent of this value. The stock is considerably undervalued, as it trades at a P/E of 11 and has a current price-to-sales ratio of 0.5. Both of these valuation metrics for Rocky Brands places the stock in the 40th percentile within the apparel goods industry. Additionally, the stock trades at 0.94 of its current book value.

Rocky Brands pays a quarterly dividend of $0.10 for an annual dividend yield of 2.53 percent. There is significant room for increasing dividends, because the payout ratio is only 7 percent.

The stock is up 36 percent in the past year. Rocky Brands has sold off in the past week, so now may be a great time to start to build a position in the stock.

Zacks Investment Research has an outperform rating on the stock. Also, the stock has a Fidelity equity summary score of 8.4 out of 10 for a Bullish outlook.

Rocky Brands expects to hit EPS of $1.42 in 2013, with EPS projected to increase 15.5 percent to $1.64 in 2014. Based on a conservative P/E of 15, Rocky Brands has a 12-month price target of $24.60, an increase of 50 percent from the current stock price.

Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.