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 and then decide whether Nordstrom, Inc. (NYSE:JWN) fits the bill.
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:
With those factors in mind, let's take a closer look at Nordstrom.
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-year annual revenue growth > 15%||4.9%||Fail|
|1-year revenue growth > 12%||11.3%||Fail|
|Margins||Gross margin > 35%||36.9%||Pass|
|Net margin > 15%||5.9%||Fail|
|Balance sheet||Debt to equity < 50%||166.4%||Fail|
|Current ratio > 1.3||2.16||Pass|
|Opportunities||Return on equity > 15%||36.3%||Pass|
|Valuation||Normalized P/E < 20||16.71||Pass|
|Dividends||Current yield > 2%||2%||Pass|
|5-year dividend growth > 10%||15.3%||Pass|
|Total score||6 out of 10|
Since we looked at Nordstrom last year, the company regained the point it lost from 2011 to 2012. The stock's dividend just barely hit the 2% mark, and the stock has also done reasonably well, rising nearly 15% over the past year.