Is UPS Destined for Greatness?http://www.fool.com/investing/general/2013/02/19/is-ups-destined-for-greatness.aspx Alex Planes
February 19, 2013
Every investor can appreciate a stock that consistently beats the Street without getting ahead of its fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with improving financial metrics that support strong price growth. Let's take a look at what United Parcel Service's (NYSE: UPS) recent results tell us about its potential for future gains.
What the numbers tell you
Growth is important on both top and bottom lines, and an improving profit margin is a great sign that a company's become more efficient over time. Since profits may not always reported at a steady rate, we'll also look at how much UPS's free cash flow has grown in comparison with its net income.
A company that generates more earnings per share over time, regardless of the number of shares outstanding, is heading in the right direction. If UPS's share price has kept pace with its earnings growth, that's another good sign that its stock can move higher.
Is UPS managing its resources well? A company's return on equity should be improving, and its debt-to-equity ratio declining, if it's to earn our approval.
Healthy dividends are always welcome, so we'll also make sure that UPS's dividend payouts are increasing, but at a level that can be sustained by its free cash flow.
By the numbers
How we got here and where we're going