There are all kinds of ways to measure financial performance, which is why the Business Journal is looking at several parameters in determining the most profitable public companies in the Los Angeles area (all in L.A. County and a few in Ventura County).

Our primary list on page 12 is based on one-year return on equity. This measures the profit a company earns for every dollar that holders of common stock have invested a common performance yardstick.

Of course, a one-year ROE can only provide a limited snapshot of a company, so we also are including three-year and five-year data (chart on the facing page). Longer time frames will offer a better look at a company's long-term performance, though this gauge also has its limitations namely, the potential of data being skewed because of one abnormally good or bad year. By looking at all three measures of ROE one-, three- and five-year it's easier to get the full story.

In addition to ROE, investors are looking for sharp rises or falls in net income from one year to the next. A chart of top winners and losers in that category is on the following page. Yet another indicator is stock market performance in 1998 (page 19).

The information in this special report was compiled by the Los Angeles office of Duff & Phelps, which used a variety of data-gathering services. Working on the project was senior analyst Marissa Jaramillo and analyst Andrey Kalashnikov. It was overseen by Greg Range, Duff & Phelps' managing director.

When possible, financial data cover the calendar year ended December 1998; in some cases, a company's reporting year ended earlier in 1998, and that data is included. In cases when a company's most recent reported annual data is in 1997, Duff & Phelps used the four most recently reported quarterly results.

Companies that have been de-listed were excluded from consideration in the ROE listings. (They are included in the market performance chart.) Also, some of the companies listed may be in the process of being acquired.

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