The Top 10 Best Small Companies - #3 Quality Systems Inc. (NextGen)

America's Top 10 Small Public Companies Kurt Badenhausen and Christina Settimi, 10.15.09, 08:00 PM EDT Forbes Magazine dated November 02, 2009 Behind the numbers of this year's best small companies Small fry got smacked hard in year two of the Great Recession: 42% of the companies in the Russell 2000 small-company index lost money in the last 12 months, versus 22% for those in the S&P 500. Still, enough winners emerged to ease the sector's overall pain. The Russell was up 8%, the S&P 6%. Our list of the 200 Best Small Companies in America begins with a search for companies that show both sales and earnings growth. Candidates must have annual revenue between $5 million and $750 million, be publicly traded for at least a year and have a stock price no lower than $5. Rankings are based on earnings growth, sales growth and return on equity in the past 12 months and over five years; we dropped companies with fuzzy accounting or looming legal troubles. We also compared the stock performance of each company with that of its peers. Shares of last year's list members outpaced the Russell by 10 percentage points. Seventy-one companies on last year's list fell off, including No. 6, PetroQuest Energy, an oil and natural gas explorer squeezed by falling prices. Eight companies outgrew the list, such as Under Armour ( UA - news - people ) (sales: $776 million). Five of this year's top ten are newcomers, including top-ranked Lumber Liquidators, seller of hardwood flooring, which went public at the end of 2007. For more financial data and corporate governance ratings, visit www.forbes.com/200best. The Top 10 Best Small Companies 1. Lumber Liquidators ( LL - news - people Started in 1994 by building contractor Thomas Sullivan, who sold surplus wood at bargain prices. Today the Toano, Va. company sells 150 varieties of flooring at more than 170 stores in 45 states. Longer store hours, a commission-driven sales staff and plenty of marketing savvy have helped in the housing downturn. 2. Allegiant Travel ( ALGT - news - people ) Operates a low-cost airline serving resort locales such as Las Vegas and Orlando. Chief Executive Maurice Gallagher receives a cash bonus only if profits (in the sense of earnings before interest and taxes) exceed 5% of sales. He's collecting: The Las Vegas company's 11% margin last year was among the highest for airlines in the U.S. 3. Quality Systems ( QSII - news - people ) This Irvine, Calif. outfit sells software that manages electronic medical records. Should get a shot in the arm from the $20 billion in medical records subsidies enacted in last winter's stimulus legislation.