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| Posted: Fri Oct 12, 2007 9:19 pm Post subject: America's 200 Best Small Companies |
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Special Report
America's 200 Best Small Companies
By Jack Gage and Christina Settimi 10.11.07, 6:00 PM ET
By The Numbers:
The Top 10
Fastest Growing
Safe Bets
Best Newcomers
Under The Radar
Featured:
Girls' Night Out
Counted, Weighed, and Divided
Pick of the Crop
Our 200 Best Small Companies in America must pass through a gauntlet to qualify for the list. We judged candidates--all with revenues between $5 million and $750 million and share prices above $5 as of Oct. 1--according to return on equity, as well as sustained sales and net profit growth over 12-month and five-year periods. Too much debt, signs of a downturn in the future or a whiff of legal troubles are all disqualifiers. We also exclude banks, utilities and REITs, since operational management has less of an impact on their results than market movements, industry regulation and requirements forcing them to pay out a majority of taxable income, respectively.
It takes more than solid books to make the cut. For example, a company like Super Micro Computer (nasdaq: SMCI - news - people ), a San Jose, Calif.-based maker of motherboards, seemed to have the financial chops. But last year it pleaded guilty to violating U.S. trade law after a Justice Department investigation revealed PC parts shipped to its Dubai distributor had been diverted to Iran. For a variety of reasons, 111 companies that appeared on our list last year didn’t make the cut this time around.
By The Numbers: The 10 Best Small Companies In America
By The Numbers: Best Small Companies--Fastest Growing
By The Numbers: Best Small Companies--Top Newcomers
By The Numbers: Best Small Companies--Safe Bets
By The Numbers: Best Small Companies--Under The Radar
Small businesses are dynamic--and sometimes volatile. You see that reflected in share prices (our list gained 26% over the last 12 months, compared with 8% for the Russell 2000). Annual turnover of the companies on our list is also an indicator of volatility, and this year the turnover reached its highest level since 2002. Clusters of hot industries chasing shifts in consumer demand, government spending and pockets of cyclical industries can cause turmoil even for small "value" companies. Last year the oil and gas patch dominated the list as oil marched to $70 a barrel; this year it's medical equipment players like No. 17, Ventanna Medical Systems (nasdaq: VMSI - news - people ) and No. 31, Cutera (nasdaq: CUTR - news - people ). Ventanna, it should be noted, is currently fighting a hostile takeover bid by Swiss pharmaceutical giant Roche Holdings.
This volatility makes reviewing and selecting 200 companies a challenge. Earnings announcements, management turnover and acquisition activity can have a big impact on the make-up of our list. To wit: soon after press time for the printed edition of this list, the U.S. military's go-to maker of unmanned aircraft, No. 26, United Industrial (nyse: UIC - news - people ), announced it would be acquired by defense contractor and maker of Bell Helicopters, Textron (nyse: TXT - news - people ). Also making moves was the recipient of last year's top honors, Nutrisystem (nasdaq: NTRI - news - people ). The Pennsylvania weight-loss specialist announced Oct. 5 that sales would miss analyst estimates by some 10%--shares were down by a third at the close of trading that same day. The stock jitters might have been worse were it not for strong cash flow bolstering its balance sheet.
There are a smattering of household names on the list with new management. At No. 142 on our list, Nathan's Famous saw corporate counsel Eric Gatoff take the helm as chief executive in January, just three years after joining the New York maker of hot dogs. And just two years after joining Lo-Jack (No. 7 as head of operations, Richard Riley took over last year with plans to build on a strong product pipeline of auto recovery technologies--and big expectations from shareholders |
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