WHAT TO LOOK FOR

Physician's Money Digest, March15 2003, Volume 10, Issue 5

Finding a good stock isn't evereasy, but with accounting scandalsand outright thievery being aneveryday occurrence, guidelines forzeroing in on potential winners canbe a big help. Some attributes ofhealthy stocks, market mavens say,are price/earnings ratios that fallbelow the industry average, lowprice-to-book ratios, and prices thatare off their 52-week highs—thelower the better. Avoid companiesthat resort to accounting gimmickslike pro forma earnings reports, andlean toward firms that pay dividends.A solid record of dividendpayouts usually indicates that profitsare legitimate. Perhaps the mostimportant criteria are growth inboth earnings and revenues. Severalyears of good growth numbers pluspositive growth forecasts typicallymean a stock is going to appreciatein price over time.