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 Sequenom, Inc. (NASDAQ:SQNM) 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 Sequenom.
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-year annual revenue growth > 15%||13.6%||Fail|
|1-year revenue growth > 12%||32%||Pass|
|Margins||Gross margin > 35%||34.2%||Fail|
|Net margin > 15%||(148.9%)||Fail|
|Balance sheet||Debt to equity < 50%||198.4%||Fail|
|Current ratio > 1.3||5.16||Pass|
|Opportunities||Return on equity > 15%||(114.2%)||Fail|
|Valuation||Normalized P/E < 20||NM||NM|
|Dividends||Current yield > 2%||0%||Fail|
|5-year dividend growth > 10%||0%||Fail|
|Total score||2 out of 9|
Since we looked at Sequenom last year, the company has dropped three points, reversing course from its one-point gain from 2011 to 2012. Margins fell and the company added a huge amount of debt, and the shares didn't respond well, falling about 10% over the past year.