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Do recent price falls mean Capitol Health Ltd and UXC Limited are in the bargain bin?

The Australian ALL ORDINARIES (INDEXASX: XAO) index plunged 2% on Friday to hit an eight-month low of 5,185 points. This is the cheapest the Australian sharemarket has been since early February and takes us back to where we were in late 2013.

The All Ordinaries and ASX 200 are now 8% from their late-August highs and high-flying small-cap stocks have been hit hard.

On Friday alone, two of my favourite small-caps on my watchlist plunged more than 7%! Capitol Health Ltd (ASX: CAJ) fell 7.2% and UXC Limited (ASX: UXC) fell 7.4%. These two promising small caps have now fallen 18% and 13% from their recent highs and are nearing my buy price. Here’s a little about the companies:

Capitol Health- Medical Accumulator

Capitol Health Ltd is a medical company with huge potential. Capitol is attempting to consolidate the non-hospital diagnostic imaging market in Australia. The company invests in Australian medical clinics that offer magnetic resonance imaging (MRI), CT scan, X-ray and ultrasound services. The company currently has around 50 clinics in Victoria and will hopefully start acquiring clinics in other states within the next 12 months.

At the latest price of 58 cents, Capitol still isn’t a screaming buy while it’s sitting on a trailing PE ratio of 34 and a forecast forward PE of around 27, but should it fall back into the 40’s I’d be very interested!

UXC- IT Specialists

Conversely, UXC Limited has pulled back to 82 cents from a recent high of 93 cents to trade on a trailing underlying PE ratio of just 17 and a forward PE of just 13. EPS fell significantly in the 2014 financial year due to one-off items but the company is well placed to grow substantially between now and 2016.

I’ve written about UXC before and still believe that it’s one of the best placed IT companies on the market. Execution is pivotal, but so far I’ve been impressed with management and believe that they will have no problem in meeting consensus estimates of a 33% jump in earnings this financial year.

In my view, these companies present a much better risk/return balance than some of the larger companies on the ASX, such as our big four banks.

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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie