Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?
One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if DISH Network
The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:
- Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
- Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
- Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
- Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
- Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
- Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.
With those factors in mind, let's take a closer look at DISH Network.
|
Factor |
What We Want to See |
Actual |
Pass or Fail? |
|---|---|---|---|
| Growth | 5-Year Annual Revenue Growth > 15% | 7.2% | Fail |
| 1-Year Revenue Growth > 12% | 12.5% | Pass | |
| Margins | Gross Margin > 35% | 42.8% | Pass |
| Net Margin > 15% | 9.2% | Fail | |
| Balance Sheet | Debt to Equity < 50% | NM | NM |
| Current Ratio > 1.3 | 1.22 | Fail | |
| Opportunities | Return on Equity > 15% | NM | NM |
| Valuation | Normalized P/E < 20 | 10.68 | Pass |
| Dividends | Current Yield > 2% | 0% | Fail |
| 5-Year Dividend Growth > 10% | 0% | Fail | |
| Total Score | 3 out of 8 |
Source: S&P Capital IQ. NM = not meaningful due to negative shareholder equity. Total score = number of passes.
Since we looked at DISH Network last year, the company has picked up a point. Growth at the satellite-TV provider has picked up, but the company still has a weak balance sheet and faces tough competition.
This time last year, DISH Network had done two things that marked a new direction for the company: It settled its DVR dispute with TiVo
On one hand, DISH is fighting hard to stay relevant as video-streaming from Netflix
But DISH's long-term plans are more ambitious. The company is considering using its satellite-radio licenses to build a 4G LTE network that would deliver wireless content independent of existing telecom mobile providers. By moving beyond the traditional television services that rival DirecTV
With the long-range nature of these strategies, DISH won't be a perfect stock anytime soon. But the company has laid the groundwork for some interesting developments in the years ahead that could eventually propel DISH's score higher.
Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.
DISH Network isn't the perfect stock, but we've got some ideas you may like better. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.
Click here to add DISH Network to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
