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Forbes Best Small Companies: A Look at Valuation Metrics

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I say this every year, but if you want stock ideas with good growth potential, you need to check out the annual Forbes best small companies list.

I try to go through the entire list each year and write about as many as possible.

For 3 years, I haven’t been able to finish it once, but now is another chance to redeem myself because the 2013 is out.

Forbes Stock Picking Methodology

Forbes Small companies

The methodology used to pick the stocks that make the list is quite simple.

  • annual revenue between $5 million and $1 billion
  • stock price no lower than $5 a share
  • excluded financial institutions, REITs, utilities and limited partnerships
  • rankings are based on earnings growth, sales growth and return on equity in the past 12 months and over five years
  • dropped thinly traded names and those with fuzzy accounting or major legal troubles
  • factored in stock performance versus each company’s peer group during the last year as of Oct. 1
  • financial data is pulled from Reuters
  • fundamentals via FactSet

How did the stocks do?

The 2012 companies appreciated 32% on average. 3% better than the Russell 2000 (INDEXRUSSELL:RUT) index.

That’s impressive because it’s a list of 100 stocks. Not a concentrated list of just 10 stocks.

The 2013 List of Companies

An excel file with the 100 companies is provided at the bottom.

Fundamental data was compiled using the OSV stock analyzer.

Here are a few ideas you can try to narrow the stocks down further.

  1. Filter the stocks closest to its 52 week low – rather than analyze the ones that are already up 125% YTD like Questcor Pharmaceuticals Inc (NASDAQ:QCOR), start with the ones at the bottom of the barrel.
  2. Filter based on cheap fundamentals such as Pandora Media Inc (NYSE:P)/First Commonwealth Financial (NYSE:FCF)
  3. Go through the companies with zero debt

The Top 10 Forbes Best Small Companies

Forbes best companies

2013 Top 10 Forbes Best Small Companies

Download the Complete List of 100 Stocks

Click to download the excel file.

This post was first published at old school value.

You can read the original blog post here Find Winners with the 2013 Forbes Best Small Companies.

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