Once again, Forbes Magazine has announced its list of the 200 best small companies in America, and once again Orange County corporations have tallied an impressive mark on the chart.
Six Orange County companies--including a pair of high-tech firms, a glass maker, an operator of vocational schools, an engineering firm and a health care company--are rated by the New York-based business publication as among the best financially performing operations in the nation. The names were gleaned from a list of 4,000 qualifying small companies--defined as companies with less than $300 million in annual sales. Forbes' choices were based primarily on solid return on shareholder equity, relatively low debt and consistent earnings growth.
Orange County's highfliers are:
AFG Industries Inc. of Irvine, the top revenue producer on the list of 200 companies; Comarco Inc. of Anaheim, which placed well within the top 15% for return on equity; Comprehensive Care Corp. of Newport Beach, one of the top profit makers, and Microsemi Corp. of Santa Ana, National Education Corp. of Newport Beach and Newport Corp. of Fountain Valley, all of which placed in the top 90 for return on equity.
In Forbes' major criterion, a five-year average return on equity, all but one of the county companies finished in the top 100, with Comarco leading the contingent in 25th place.
California ranked tops among all states on the Forbes list with 38 companies. New York placed second, with 33 firms.
Surprisingly, chief executives say, there are some disadvantages to making the Forbes list. Although the recognition is nice, once a company has been singled out, stockholders commonly pressure company executives to continue making the grade, executives say.
For example, Comprehensive Care, the health care company that runs a nationwide chain of alcohol and drug dependency treatment centers, has made the list for seven years straight. But when the company's stockholders see the Forbes list each year, "they call and ask us what we're going to do next year," said B. Lee Karns, the company's chairman and chief executive.
Comprehensive Care already has big plans for 1986, Karns said. The company plans to expand capacity (hospital beds) by 25%, to 6,200 from the current 5,000. That includes the addition of two--or possibly three--new hospitals. Within the next year, the company also expects to add 500 new employees to its current payroll of 3,600.
Comprehensive Care posted an average 13.4% return on equity over the past five years and showed net income of $17.8 million on revenues of $168.8 million last year. Its profit ranking was 33rd on the Forbes list while it ranked 176th for five-year average return on equity.
At Comarco, a defense engineering and computer services company, the average return on equity over the past five years was an impressive 28.7%, placing it 25th on the list of the top 200 performers in the nation. But with the Department of Defense as its biggest customer, "we're reaching the upper limit of what we can do in this area," said Glenn D. Buell, the company's president and chief executive.
With that in mind, Comarco soon plans to "stick its first little pinkie out into the commercial world" with a new cellular telephone product, Buell said. The company hopes to initially attract state and local governments as customers, and eventually attract consumers.
Comarco, which employs 700 nationwide, including 150 in Anaheim, plans to double its local work force in the next two years--primarily by hiring engineers and documentation specialists, Buell said. Comarco posted net income of $1.8 million last year on sales of $31.9 million.
Among the other Orange County companies listed, Microsemi, a semiconductor manufacturer, showed average five-year return on equity of 19.5%, as did Newport Corp., a manufacturer of laser optics components. The two placed 85th and 86th on the Forbes list.
Average return on equity for the past five years for AFG Industries, a glass manufacturing company that just recently moved its corporate headquarters to Orange County from Tennessee, was 19.4%, good for 87th place. AFG, with $298.1 million in sales, topped the Forbes list as a revenue producer and it placed 28th in net profits, with income of $19.1 million for the 12-month period.
National Education, one of the nation's largest technical and vocational training companies, posted a 19.1% average return on equity, finishing number 92 on the list.
Forbes rated Franklin Resources, a fund management company in San Mateo, as the small company with the best five-year average return on equity, at 72.3%. The magazine also noted that only 89 companies from last year's list of the top 300 small companies returned to this year's list. Three of them were from Orange County: Comprehensive Care, National Education and Newport Corp.
Although the Forbes seal of approval is nice kudos, to some small companies it apparently comes as no surprise. The Forbes ranking, said Comprehensive Care's Karns, "is a public endorsement of a good feeling we already had."