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 (PRAA), Asset Acceptance (AACC), and Cass Infomation Systems (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	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	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

Disclosure: Steve owns no position in any stocks discussed in this article.