FOR THE FIFTH YEAR, WE ARE PROUD TO PRESENT the INC. 500. Each of the companies that appear on this year's list represents a dramatic tale of risk and reward, enterprise and ingenuity -- too many tales, in fact, to be able to do them all justice between the covers of a single issue. In the pages that follow, we visit a remarkable building-supply company that tops the 1986 list with its 100,000% growth over the past five years. We also explore different strategies for business growth as they have been followed by the six companies that have made the 500 list since its inception.

Beyond the individual tales, however, is the story told by the INC. 500 as a whole. Each year's class of growth leaders has anticipated some of the changes in U.S. business, providing what the statisticians might call a leading economic indicator. 1986 is no exception.

This year, for example, there is a hint that the pace of growth has turned downward for the first time. The Class of '86 has an average five-year sales growth of 1,042% -- nearly double the figure for the original Class of '82, but down from the roaring 1,315% rate of last year's. The dip probably foreshadows some softening in the overall economy. But there is also strong statistical evidence that much more of this year's growth rate is real growth, not growth fed by the inflationary fires of the late 1970s.

Just as important, the INC. 500 has become successively more productive. The companies on this year's list are considerably bigger in terms of sales, but considerably smaller in terms of employment, than companies on earlier lists. As a result, average sales per employee in 1986 are about $126,000, or more than twice the productivity of the Class of '82.

A less dramatic trend is toward smaller profit margins. Although the information we get from private companies is sketchy, it does reveal that 61% of this year's companies operated with aftertax profits of 5% or less. In 1982, when taxes were generally higher, only about 40% of the companies operated on such narrow margins. Although most owners would prefer to see higher profits, many economists would find in the sales, productivity, and profit figures some evidence of a leaner, hungrier, and more competitive economy.

Finally, there are encouraging signs of resilience in America's industrial sector. During the past five years, Rust Belt states, such as Indiana, Michigan, Missouri, Ohio, Pennsylvania, New Jersey, and New York, have held their own or shown modest gains in the geographic distribution of INC. 500 companies. And over the same period, the lists have shown only a 5% shift from manufacturing to the service sector. Is this proof of an industrial renaissance? Hardly. But it does seem to cast a shadow of doubt on recent prophecies of industrial collapse.

The wisdom of those who study it is that the U.S. economy is today the most dynamic and entrepreneurial of any nation in the world. In its five years, the INC. 500 has become a metaphor for that dynamism and spirit of entrepreneurship. To those who made the list this year -- and those who aspire to it in the future -- we salute your risk taking, your resolve, and your resourcefulness.