Forbes' 200 Best Small Companies Through the Magic Formula Screen

A couple of weeks ago, MagicDiligence looked at MFI stocks in the Forbes' Best 200 Small Companies for 2009 list. In producing that article, I thought it would be interesting to take these 200 firms as a "universe", calculate MFI earnings yield and return on capital statistics for each, and then rank them to get a Magic Formula-style list of which ones are the best combination of cheap and high quality.

The recent break gave me a chance to do just that. Before we get to the list, though, a few things should be mentioned. The first is that some current official MFI stocks are not that highly rated here, though most are. The main reason for this is how different data providers treat operating expenses. For example, InterDigital (IDCC - a current MFI stock) has $37 million in one-time restructuring fees in the past 12 months that are technically operating expenses but should be treated as non-operating for MFI purposes. The data feed used for this project included them, leading to its relatively low ranking. Also, Joel Greenblatt's exact recipe for calculating MFI statistics is unknown. The numbers below use MagicDiligence's approximations for earnings yield and MFI return on capital.

There were 3 stocks in the 200 that cannot be judged on a Magic Formula basis, as the strategy explicitly ignores financial and utility companies. These include Portfolio Recovery (NASDAQ:PRAA), Asset Acceptance (AACC), and Cass Infomation Systems (NASDAQ:CASS). MSCI (MXB) has negative invested capital using my calculations, so it was thrown out as well. Finally, Hi-Shear Technology (HSR) was missing data and thus discarded.

So, all that said, here are the rankings, with statistics calculated from prices at Friday's market close:

Rank Company Ticker MFI Score EY ROIC EY Rank ROIC Rank
1 Amsurg AMSG 15 30.8% 155.0% 2 13
2 j2 Global Communications JCOM 26 15.4% 386.3% 24 2
3 Pre-Paid Legal Services PPD 29 22.2% 121.9% 9 20
4 Almost Family AFAM 31 16.0% 172.1% 22 9
5 U.S. Physical Therapy USPH 44 16.5% 99.6% 18 26
6 LHC Group LHCG 46 14.7% 124.0% 28 18
7 Bolt Technology BOLT 49 23.2% 61.0% 6 43
8 Allegiant Travel ALGT 50 20.5% 68.4% 10 40
9 Exponent EXPO 51 18.4% 68.8% 13 38
10 Sterling Construction STRL 58 25.3% 49.4% 4 54
11 PetMed Express PETS 62 12.0% 122.7% 43 19
12 Hawkins HWKN 63 19.9% 51.9% 11 52
13 Forrester Research FORR 68 11.1% 130.1% 51 17
14 National Presto Industries NPK 71 17.3% 49.4% 16 55
15 Matrix Service MTRX 73 23.2% 42.2% 7 66
16 K-Tron International KTII 74 14.4% 60.1% 30 44
17 Deckers Outdoor DECK 77 14.6% 58.2% 29 48
18 American Science & Engineering ASEI 79 11.3% 89.5% 48 31
19 Powell Industries POWL 82 18.0% 41.8% 15 67
20 Nathan's Famous NATH 88 11.6% 64.2% 47 41
21 Tekelec TKLC 88 13.1% 54.4% 38 50
22 Liquidity Services LQDT 90 9.0% 236.7% 86 4
23 Middleby MIDD 92 10.0% 115.8% 69 23
24 AZZ AZZ 92 16.1% 39.8% 21 71
25 Comtech Telecommunications CMTL 93 13.2% 49.3% 37 56
26 Chattem CHTT 97 9.0% 133.4% 81 16
27 Aaon AAON 97 13.9% 42.8% 33 64
28 Jos. A. Bank Clothiers JOSB 98 15.7% 37.3% 23 75
29 Air T AIRT 106 29.4% 29.1% 3 103
30 Rimage RIMG 108 14.8% 34.6% 27 81
31 WD-40 WDFC 112 9.0% 90.5% 82 30
32 Sport Supply Group RBI 114 12.7% 39.0% 41 73
33 NCI NCIT 115 8.9% 91.1% 87 28
34 CBIZ CBZ 116 11.0% 44.7% 53 63
35 Navigant Consulting NCIT 117 8.9% 91.1% 88 29
36 Rocky Mountain Chocolate Factory RMCF 117 10.6% 48.2% 60 57
37 J&J Snack Foods JJSF 117 11.3% 40.9% 49 68
38 Jack Henry & Associates JKHY 118 9.0% 82.2% 85 33
39 Quidel QDEL 118 9.8% 59.8% 73 45
40 NutriSystem NTRI 122 7.6% 166.2% 111 11
41 Dolby Laboratories DLB 124 8.4% 104.0% 100 24
42 Hittite Microwave HITT 129 7.8% 120.5% 108 21
43 Inter Parfums IPAR 129 15.4% 28.7% 25 104
44 Ensign Group ENSG 133 17.0% 24.3% 17 116
45 Syntel SYNT 135 8.2% 83.0% 103 32
46 Pros Holdings PRO 137 6.6% 183.0% 129 8
47 Raven Industries RAVN 139 9.4% 45.4% 77 62
48 FactSet Research Systems FDS 140 6.4% 199.2% 134 6
49 Computer Task Group CTGX 140 11.9% 31.1% 44 96
50 Atlantic Tele-Network ATNI 141 10.7% 34.0% 57 84
51 American Reprographics ARP 141 11.0% 32.9% 54 87
52 Peet's Coffee & Tea PEET 141 11.1% 32.7% 52 89
53 Transcend Services TRCR 143 6.3% 225.5% 138 5
54 Landauer LDR 143 7.3% 98.9% 116 27
55 CPI International CPII 143 11.7% 30.8% 46 97
56 World Wrestling Entertainment WWE 149 8.5% 52.5% 98 51
57 Tessco Technologies TESS 149 16.2% 20.5% 20 129
58 Young Innovations YDNT 150 9.7% 36.7% 74 76
59 Friedman Industries FRD 150 31.7% 16.1% 1 149
60 Ampco-Pittsburgh AP 151 24.6% 16.9% 5 146
61 Digital River DRIV 152 9.0% 40.0% 83 69
62 Rick's Cabaret International RICK 152 23.2% 17.4% 8 144
63 American Public Education APEI 154 6.3% 134.1% 139 15
64 Books-A-Million BAMM 154 18.7% 18.0% 12 142
65 Quest Software QSFT 156 7.2% 68.9% 119 37
66 Volcom VLCM 158 10.8% 29.2% 56 102
67 JDA Software Group JDAS 159 7.3% 62.0% 117 42
68 Ansys ANSS 161 4.8% 244.8% 158 3
69 Portec Rail Products PRPX 161 11.2% 25.8% 50 111
70 Communications Systems JCS 161 15.1% 19.3% 26 135
71 Strayer Education STRA 163 5.6% 158.2% 151 12
72 CoStar Group CSGP 166 6.6% 70.5% 130 36
73 Tyler Technologies TYL 168 5.8% 118.5% 146 22
74 Orion Marine Group ORN 168 9.6% 31.9% 75 93
75 Capella Education CPLA 169 5.1% 146.5% 155 14
76 Balchem BCPC 169 7.1% 59.3% 123 46
77 Synaptics SYNA 169 7.8% 47.7% 109 60
78 L.B. Foster FSTR 169 14.0% 19.1% 31 138
79 Argon ST STST-OLD 170 9.3% 32.0% 78 92
80 Dorman Products DORM 170 13.8% 19.3% 34 136
81 ICU Medical ICUI 172 10.4% 27.4% 63 109
82 LSB Industries LXU 172 12.9% 19.5% 40 132
83 Informatica INFA 174 3.8% 447.6% 173 1
84 Quality Systems QSII 174 4.5% 167.3% 164 10
85 Techne TECH 174 6.4% 68.6% 135 39
86 NIC EGOV 175 4.1% 184.4% 168 7
87 Heico HEI 175 8.6% 35.2% 96 79
88 Steven Madden SHOO 175 8.9% 33.0% 89 86
89 Spectrum Control SPEC 175 14.0% 17.8% 32 143
90 Dionex DNEX 176 6.8% 55.7% 127 49
91 Lumber Liquidators LL 177 7.0% 50.6% 124 53
92 Integra LifeSciences IART 177 8.5% 35.7% 99 78
93 Lufkin Industries LUFK 178 10.3% 25.3% 65 113
94 Meridian Bioscience VIVO 179 5.9% 72.3% 144 35
95 Boston Beer SAM 179 8.7% 33.3% 94 85
96 Computer Programs & Systems CPSI 181 5.1% 101.2% 156 25
97 DXP Enterprises DXPE 181 10.7% 22.5% 58 123
98 GulfMark Offshore GLF 182 16.4% 12.7% 19 163
99 Somanetics SMTS 185 9.1% 28.7% 80 105
100 Badger Meter BMI 186 8.2% 34.5% 104 82
101 American Physicians Service Group AMPH-OLD 187 18.4% 10.3% 14 173
102 QLogic QLGC 188 6.2% 59.0% 141 47
103 Calavo Growers CVGW 188 9.5% 25.7% 76 112
104 Multi-Color LABL 188 10.6% 21.3% 61 127
105 Darling International DAR 189 8.9% 30.0% 90 99
106 Shenandoah Telecommunications SHEN 190 10.7% 20.3% 59 131
107 Emergent Biosolutions EBS 191 10.0% 23.1% 70 121
108 Adtran ADTN 192 8.3% 32.1% 101 91
109 Oil-Dri Corp of America ODC 193 13.3% 14.4% 36 157
110 Obagi Medical Products OMPI 194 6.4% 48.2% 136 58
111 Hibbett Sporting Goods HIBB 195 8.7% 29.6% 95 100
112 Houston Wire & Cable HWCC 197 10.2% 20.5% 67 130
113 ESCO Technologies ESE 198 7.3% 35.2% 118 80
114 Haemonetics HAE 200 7.6% 32.9% 112 88
115 Dover Downs Gaming & Entertainment DDE 202 12.1% 13.6% 42 160
116 Dynamic Materials BOOM 204 8.6% 27.9% 97 107
117 National Healthcare NHC 205 13.1% 11.6% 39 166
118 Northwest Pipe NWPX 205 13.7% 10.7% 35 170
119 HMS Holdings HMSY 206 4.0% 76.1% 172 34
120 Cornell CRN 207 11.8% 13.0% 45 162
121 ICF International ICFI 210 6.5% 36.2% 133 77
122 Chase CCF 210 10.0% 18.6% 71 139
123 Wright Express WXS 210 10.5% 16.6% 62 148
124 Cantel Medical CMN 211 8.2% 28.4% 105 106
125 Natural Gas Services Group NGS 211 10.9% 15.0% 55 156
126 TIBCO Software TIBX 214 6.3% 38.3% 140 74
127 Healthcare Services Group HCSG 215 6.0% 39.8% 143 72
128 Bio-Reference Laboratories BRLI 215 7.2% 31.2% 120 95
129 Insituform Technologies INSU 215 8.9% 22.5% 91 124
130 DG FastChannel DGIT 217 5.7% 40.0% 147 70
131 Tenet TISI 218 8.9% 21.6% 92 126
132 IEC Electronics IEC 219 9.9% 16.8% 72 147
133 Kaydon KDN 224 8.1% 24.1% 106 118
134 Medifast MED 228 4.1% 47.9% 169 59
135 Carbo Ceramics CRR 229 7.4% 24.5% 114 115
136 Air Methods AIRM 229 9.2% 16.1% 79 150
137 Marten Transport MRTN 233 10.4% 10.9% 64 169
138 Anaren ANEN 239 9.0% 15.3% 84 155
139 Monro Muffler Brake MNRO 241 7.2% 23.3% 121 120
140 Universal Electronics UEIC 243 7.8% 19.5% 110 133
141 Concur Technologies CNQR 244 2.3% 47.3% 183 61
142 MTS Systems MTSC 244 7.0% 23.9% 125 119
143 Hornbeck Offshore Services HOS 247 10.3% 8.0% 66 181
144 Neogen NEOG 249 4.8% 32.4% 159 90
145 Twin Disc TWIN 250 10.2% 8.0% 68 182
146 Lincoln Educational Services LINC 254 1.6% 42.6% 189 65
147 Energy Recovery ERII 258 4.8% 30.4% 160 98
148 Gen-Probe GPRO 258 5.7% 27.2% 148 110
149 F5 Networks FFIV 260 3.5% 34.2% 177 83
150 Cogent COGT 260 8.3% 13.9% 102 158
151 Buffalo Wild Wings BWLD 265 6.4% 21.3% 137 128
152 Exactech EXAC 266 8.1% 13.7% 107 159
153 NVE NVEC 271 5.7% 22.8% 149 122
154 Gulf Island Fabrication GIFI 272 8.8% 9.0% 93 179
155 AeroVironment AVAV 275 4.2% 27.8% 167 108
156 Gorman-Rupp GRC 276 7.2% 15.7% 122 154
157 Red Hat RHT 279 2.0% 31.4% 185 94
158 Green Mountain Coffee Roasters GMCR 279 3.4% 29.5% 178 101
159 Lindsay LNN 279 5.9% 19.4% 145 134
160 Franklin Electric FELE 279 6.9% 15.8% 126 153
161 United States Lime & Minerals USLM 279 7.4% 12.4% 115 164
162 Knight Transportation KNX 282 6.6% 16.1% 131 151
163 Anika Therapeutics ANIK 284 7.6% 10.7% 113 171
164 Graco GGG 289 3.6% 24.9% 175 114
165 Advisory Board ABCO 289 5.5% 19.2% 152 137
166 InterDigital IDCC 290 4.5% 21.9% 165 125
167 Dril-Quip DRQ 297 5.0% 18.4% 157 140
168 Heartland Express HTLD 298 5.5% 17.1% 153 145
169 Rentrak RENT 299 2.6% 24.3% 182 117
170 AngioDynamics ANGO 302 4.8% 18.3% 161 141
171 Pike Electric PIKE 305 6.8% 9.6% 128 177
172 California Pizza Kitchen CPKI 312 6.6% 8.2% 132 180
173 Genesee & Wyoming GWR 318 6.1% 9.7% 142 176
174 ViaSat VSAT 321 5.5% 11.3% 154 167
175 Forward Air FWRD 322 4.1% 15.9% 170 152
176 GeoResources GEOI 337 5.7% 5.9% 150 187
177 Zumiez ZUMZ 341 4.3% 9.8% 166 175
178 Citi Trends CTRN 342 3.7% 11.3% 174 168
179 II-VI IIVI 344 3.4% 12.2% 179 165
180 Astronics ATRO 345 4.8% 7.0% 162 183
181 Perficient PRFT 347 1.9% 13.4% 186 161
182 Eastern EML 349 4.6% 6.0% 163 186
183 BJ's Restaurants BJRI 355 4.1% 6.2% 171 184
184 Rackspace Hosting RAX 356 2.1% 10.7% 184 172
185 Arena Resources ARD 358 3.4% 9.4% 180 178
186 National Instruments NATI 362 1.7% 10.3% 188 174
187 Ladish Company LDSH 367 3.6% 3.1% 176 191
188 Berry Petroleum BRY 371 3.2% 3.4% 181 190
189 Royal Gold RGLD 375 1.6% 6.2% 190 185
190 Supertex SUPX 376 1.9% 4.3% 187 189
191 Bovie Medical BVX 382 0.5% 4.6% 194 188
192 Rochester Medical ROCM 385 0.7% 3.1% 193 192
193 Diodes DIOD 385 1.0% 2.1% 192 193
194 RTI International Metals RTI 385 1.4% 0.8% 191 194
195 Stratasys SSYS 390 0.1% 0.3% 195 195
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Disclosure: Steve owns no position in any stocks discussed in this article.