The brightest, shiniest star on our Small-Cap Stars is the maker of generic drugs Lannett Company (LCI) . Lannett’s stock went on a tear in 2013, gaining over 550 percent, easily clearing the threshold very rare single-year seven bagger. And it's jumped again since the end of 2013, putting it up over 600 percent since the start of last year.

Unlike many successful small caps in the health care sector, Lannett achieved this feat through steady revenue increases from products that are on the market now, making it very different from the other biotechs waiting for approval for their novel new treatment(s) that will pay the bills for the next decade.

However, as the company with the best returns of the other Small-Cap Stars, a list that returned over 45 percent in 2013, Lannett is in many ways a standout among standouts, and its impressive performance deserves some scrutiny.

LCI Viewed Through the DuPont System

Using the DIY Research section of Equities.com, we can take a closer look at why Lannett could be crushing its competitors right now. The DuPont system breaks down simple Return on Equity (ROE, calculated by dividing net profit by total equity) into three components that give a little more insight into what’s in play. Namely net profit margin (net profit/sales), asset turnover (sales/assets), and the equity multiplier (assets/equity).

By looking at these three factors and comparing them to industry averages, we can get a more comprehensive analysis of why Lannett’s beating the rest of the industry.

Outstanding Margin Drives Gains

If you enter Lannett’s ticker into our DIY Research section and click on the “DuPont Deport” tab, you can see what’s probably behind Lannett’s big year. Lannett shows significantly better ROE than the industry average, which is actually negative in this case. Given that many small-cap heath care companies are biotechs that are borrowing heavily to fund research into treatments that won’t come to market for some time, this isn’t necessarily surprising. Lannett, however, shows an ROE that’s only slightly negative, much better than the industry average.

And what’s likely driving this is the huge margin Lannett boasts over industry average in terms of its profit margin. Against an industry average of -2.6726, Lannett’s -0.0026 speaks of a company that’s much more consistently profitable than the rest of the industry.

Asset Turnover Ideal, Equity Multiplier Could be a Concern

In terms of ROE and net margin, one is ideally looking for companies that are significantly better than the industry average, and Lannett does not disappoint. However, asset turnover and the equity multiplier (essentially a measure of leverage) are ideal when they’re close to the industry average.

And Lannett’s asset turnover is therefore truly excellent, as it matches almost exactly the industry average. The combination of this number with the net margin could give some real insight into how the company’s shares have grown so quickly.

One negative, however, could be found in looking at Lannett’s equity multiplier, which is below average and appears to be trending further in that direction. However, given that this number includes a company’s debt, it’s better for Lannett to be below average than above average. And, again, given that the industry has many companies that are using debt to fund research without any revenue, Lannett’s being below average may not be a considerable negative. Certainly, if it is, it hasn’t been weighing on the share price.

Lannett Company’s Big Year Unsurprising Based on DuPont

What the future holds for Lannett is unclear, as it always is investing, but a look at the DuPont analysis of Lannett gives a strong indication of how the company has performed so well over the last 13 months. In fact, another year like this one and Lannett will be too big to qualify for the small-cap stars.