IT WAS A 12-MONTH PERIOD DURING which just about every imaginable market index erupted to an all-time high. So a casual investor might expect that the most imaginative index of all -- INC.'s fanciful calculation of the market performance of the year's fast growers -- would go along with the crowd. Indeed it did, but its gain of 36% barely nosed out most of the thundering herd of comparable popular indexes (see the box below).

Ordinarily in a roaring bull market, swift-moving stocks like the lightly capitalized throng tabulated here surge well out in front of the elephantine DJI. Four years ago, in a similarly frenzied atmosphere, they accomplished just that, netting a whopping 72% gain as the Dow posted 37%. That they didn't this time around is partly accounted for by a technicality, and partly by a new fact of investment life.

In 1986, the arithmetic divisor employed to keep the 30-stock DJIA from becoming distorted by splits, dividends, and listing changes hit an historic low at 0.889, having started out in 1928 at, of course, 30. Last year the divisor thus actually became a multiplier. The effect was that as the Dow's blue-chip components, chosen to represent the universe of U.S. industry, carried it into higher ground, the index gathered new statistical momentum and reacted with proportionately larger moves than ever before.

The new fact of investment life is simply that profitability is more important than sizzling sales growth. The rather puzzling circumstance that only 53 of the INC. 100 stocks advanced in a major bull market, during which no fewer than 28 of the 30 DJI stocks went up, shows what happens when revenue gains aren't brought to the bottom line. Nine of INC.'s top 20 sales gainers actually lost ground in the market; or in slightly different perspective, 27 of the list's 44 stock losers were nonetheless able to place in the top half of sales growth. This year especially, savvy stock traders were insisting that earnings accompany sales. Not only did holders bail out if earnings fell short of expectations, but new buyers were reluctant to jump back in, leaving the stock of many an income-poor corporation wilting on the vine.

With so many emerging issues to choose from -- and those rendered increasingly accessible to institutions by NASDAQ's expanding automated market -- no wonder speculative fervor dampened. The critical condition of Westworld Community Healthcare Inc. (WCHI), #18 in sales growth but the runaway booby-prizewinner here, demonstrates how fragile sales dollars can be despite their giddy rate of rise on paper. The precautionary tale told on page 59 is confirmed by the 92% drop of WCHI's stock, trading at the price of a few aspirin when last seen. The 99th-place stock, National Healthcare Inc. -- also a rural medical service up to its ears in, let us say, entrepreneurial excess -- didn't fare much better from its rank as INC.'s swift-grower #5. The 98th-place market performer, Shanley Oil Co., was INC.'s 20th-best sales grower; investors dumped the stock as the year's losses climbed.

Not that soaring sales are in themselves necessarily suspect. Second in revenue growth, Lotus Development Corp. efficiently converted operations-generated sales into steady earnings and thence into fourth position among stock performers. Taking quite a different route to the same goal, private CitiPostal Corp. maneuvered its stock swap with a dormant public company into virtually overnight market gains (see Finance: "The Perfect Acquisition," January), while acquisition-minded Sahlen & Associates Inc. used tax credits to enhance already climbing per-share earnings.

It falls to #1 Home Shopping Network Inc. (HSN) to set perhaps the most instructive example. Newly public in May of last year at a surprisingly reasonable $18 a share, HSN stock proceeded to split twice as it took off on a dizzying ascent probably unmatched in the annals of underpriced initial public offerings (see Insider: "Making Mail Order Obsolete," October 1986). The stock of the television retailer reached 47 -- the presplit equivalent of 282 -- before tiring. But tire it did. HSN followers were let down by quarterly sales that more than quadrupled those of the prior-year quarter. Experts had predicted they'd be closer to quintupled. Within a few weeks, HSN stock had given back about half its gain.

Which goes to show that no matter how well a company performs, there's always someone who thinks it should do better. One might feel that way about the 1987 INC. 100, yet its positive performance far outshone last year's, when INC.'s group came in last among the averages. Even with misfortune yapping at the heels of a few wretched stragglers, the current upstarts managed to outpace the slow-and-steady tortoises of the Dow. And on balance they trounced the other fleet-footed hares in the over-the-counter market, whence 90 of INC.'s own entrants come. So our revenue growers must be doing something right, after all. INC. 100

MARKET PERFORMANCE

1987 $100

Company (symbol/exchange) rank 2/28/86 2/27/87 worth

1. Home Shopping Network (HSN/A) n1 10 $18.00 $33.00 $1,100.00

2. ATI Medical (ATIM/O) n2 56 2.00 10.25 512.50

3. CitiPostal (CITI/O) n3 40 0.25 4.50 450.00

4. Sahlen & Associates (SALN/O) 19 0.81 2.63 323.08

5. Lotus Development (LOTS/O) n4 2 24.00 23.00 287.50

6. Duramed Pharmaceuticals (DRMD/O) n5 91 6.00 17.00 283.33

7. VM Software (VMSI/O) n6 94 20.25 36.50 270.37

8. Oracle (ORCL/O) n7 60 15.00 38.50 256.67

9. Ashton-Tate (TATE/O) n8 41 23.00 26.50 230.43

10. Catalyst Energy Development (CEDC/O) 1 11.13 25.63 230.34

11. Telstar (TSTR/O) 53 0.13 0.28 225.00

12. New England Critical Care (NECC/O) n9 65 10.00 22.25 222.50

13. MiniScribe (MINY/O) 37 5.69 12.13 213.19

14. 3Com (COMS/O) 38 10.88 22.88 210.34

15. Wyse Technology (WYSE/O) 3 13.50 27.88 206.48

16. Tech Data (TECD/O) n2 78 9.75 20.00 205.13

17. Kaypro (KPRO/O) 96 1.44 2.94 204.35

18. Envirodyne (ENVR/O) 23 14.50 28.00 193.10

19. Informix (IFMX/O) n5 42 7.50 14.00 186.67

20. Ballard Medical Products (BMED/O) n10 26 9.75 12.00 184.62

21. TCBY Enterprises (TCBY/O) n11 52 24.25 19.25 178.61

22. Expeditors Int'l (EXPD/O) n12 22 14.63 16.25 166.67

23. Datavision (DVIS/O) 63 1.88 3.13 166.67

24. EMC (EMCS/O) n13 68 16.50 27.50 166.67

25. Memtek (METK/O) 95 1.63 2.69 165.38

26. Innovative Software (INSO/O) 69 12.00 19.75 164.58

27. Mentor Graphics (MENT/O) 17 17.25 28.00 162.32

28. King World Productions (KWP/N) n14 35 39.75 20.75 156.60

29. V. Band Systems (VBAN/O) n15 73 26.75 27.50 154.21

30. Step-Saver Data Systems (CODA/O) 76 4.00 6.13 153.13

31. Price Communications (PR/A) n16 8 9.25 11.25 152.03

32. Stratus Computer (STRA/O) 59 21.25 31.75 149.41

33. Financial News Network (FNNI/O) 75 9.50 14.00 147.37

34. Consolidated Stores (CNS/A) n17 80 22.00 16.13 146.59

35. Cerner (CERN/O) n9 99 16.00 22.25 139.06

36. Certified Collateral (CARX/O) n18 54 16.00 14.25 133.59

37. Vitronics (VITX/O) 48 4.50 6.00 133.33

38. Xicor (XICO/O) 90 9.75 12.88 132.05

39. Apollo Computer (APCI/O) 62 15.50 20.00 129.03

40. Advanced Telecommunications (ATEL/O) 13 9.63 12.38 128.57

41. Applied Biosystems (ABIO/O) 50 32.00 41.00 128.13

42. Ben & Jerry's Homemade (BJIC/O) 66 14.50 18.50 127.59

43. Chronar (CRNR/O) 79 11.75 14.88 126.60

44. Fountain Oil & Gas (FGAS/O) n19 70 0.50 0.63 125.00

45. DEST (DEST/O) 98 4.00 4.88 121.88

46. Teknowledge (TKAI/O) n7 51 13.00 15.38 118.27

47. AutoSpa (LUBE/O) 83 1.13 1.31 116.67

48. California Biotechnology (CBIO/O) 33 16.00 18.38 114.84

49. American City Business Journals (AMBJ/O) 11 22.50 25.25 112.22

50. Bonneville Pacific (BPCO/O) n20 7 9.00 9.75 108.33

51. Pre-Paid Legal Services (LEGL/O) n21 92 $14.75 $12.63 $106.99

52. People Ridesharing Systems (RIDE/O) n22 64 8.25 8.00 106.67

53. Computer Memories (CMIN/O) 28 2.50 2.63 105.00

54. American Communications & TV (ASTV/O) 81 0.13 0.13 100.00

55. Jacor Communications (JCOR/O) 72 7.00 7.00 100.00

56. Radyne (RADN/O) 84 1.25 1.25 100.00

57. Symbion (SYMB/O) 30 2.81 2.75 97.78

58. Insituform Southeast (ISEC/O) n5 27 7.75 7.50 96.77

59. American Businessphones (ABPI/O) 44 7.00 6.75 96.43

60. Calgene (CGNE/O) n20 87 14.00 13.50 96.43

61. Saratoga Standardbreds (STGA/O) 45 2.88 2.75 95.65

62. Giga-tronics (GIGA/O) 71 13.00 12.00 92.31

63. Northeastern Mortgage (NM/A) n23 12 10.25 8.25 88.54

64. Sterling Software (SSW/A) 15 15.25 13.50 88.52

65. Manufactured Homes (MNH/A) 89 13.75 11.63 84.55

66. LSI Logic (LLSI/O) n24 34 28.25 15.88 84.29

67. Entre Computer Centers (ETRE/O) 21 6.75 5.50 81.48

68. Cade Industries (CADE/O) 14 1.25 0.97 77.50

69. Fibronics Int'l (FBRX/O) 67 13.25 10.13 76.42

70. Satellite Music Network (SMNI/O) 86 6.50 4.75 73.08

71. AST Research (ASTA/O) 6 26.13 19.00 72.73

72. Kings Road Entertainment (KREN/O) 25 5.13 3.63 70.73

73. FONAR (FONR/O) 49 9.38 6.50 69.33

74. Codenoll Technology (CODN/O) 100 15.75 10.75 68.25

75. MMI Medical (MMIM/O) 61 7.50 5.00 66.67

76. Ross Stores (ROST/O) 58 12.00 8.00 66.67

77. Lexicon (LEXI/O) 77 4.63 3.00 64.86

78. Patient Technology (PTI/A) 74 7.38 4.75 64.41

79. Lam Research (LRCX/O) 9 11.88 7.50 63.16

80. Walker Telecommunications (WTEL/O) 29 8.38 5.19 61.94

81. Doskocil (DOSK/O) 39 1.75 1.06 60.71

82. Bio-Logic Systems (BLSC/O) 31 12.00 7.25 60.42

83. Tekelec (TKLC/O) n2 47 12.25 7.00 57.14

84. PSE (POW/A) n2 43 14.50 8.25 56.90

85. Cable Advertising Systems (CABS/O) 82 2.44 1.38 56.41

86. United HealthCare (UNIH/O) 57 13.88 7.63 54.95

87. American Network (ANWI/O) 4 3.00 1.63 54.17

88. Brentwood Instruments (BRWD/O) 46 7.25 3.63 50.00

89. BeautiControl Cosmetics (BUTI/O) n7 55 16.00 7.25 45.31

90. Fuddruckers (FUDD/O) 85 4.63 2.00 43.24

91. MBI Business Centers (MBOX/O) 36 10.50 4.50 42.86

92. Video Science Technology (VIDS/O) 93 0.50 0.19 37.50

93. Iomega (IOMG/O) 16 17.50 6.13 35.00

94. Symbolics (SMBX/O) 24 12.13 4.00 32.99

95. Circadian (CKDN/O) 97 14.00 4.50 32.14

96. Newman Communications (NBOC/O) 32 3.25 0.88 26.92

97. Int'l Thoroughbred Breeders (ITB/A) 88 3.63 0.88 24.14

98. Shanley Oil (SOCM/O) 20 0.72 0.16 21.74

99. National Healthcare (NHCI/O) 5 14.63 3.00 20.51

100. Westworld Community Healthcare (WCHI/O) 18 14.50 0.75 5.17

n1 first public, 5/86; 3:1 split, 9/86; 2:1 split, 1/87

n2 first public, 5/86

n3 first price as merged entity, 5/86; recapitalized 1/4:1, 2/87

n4 3:1 split, 2/87

n5 first public, 9/86

n6 3:2 split, 12/86

n7 first public, 3/86

n8 2:1 split, 1/87

n9 first public, 10/86

n10 3:2 split, 2/87

n11 3:2 split, 4/86; 3:2 split, 7/86

n12 3:2 split, 9/86

n13 first public, 4/86

n14 3:1 split, 9/86

n15 3:2 split, 2/86

n16 25% stock dividend, 1/87

n17 2:1 split, 6/86

n18 3:2 split, 8/86

n19 as of 10/86

n20 first public, 7/86

n21 5:4 split, 1/87

n22 10% stock dividend, 11/86

n23 first public, 5/86; 10% stock dividend, 2/87

n24 3:2 split, 3/86