Is Consolidated Graphics the Perfect Stock?

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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 Consolidated Graphics (NYS: CGX) 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 Consolidated Graphics.

Factor

What We Want to See

Actual

Pass or Fail?

Growth5-Year Annual Revenue Growth > 15%3.2%Fail
 1-Year Revenue Growth > 12%5.9%Fail
MarginsGross Margin > 35%24.5%Fail
 Net Margin > 15%3.4%Fail
Balance SheetDebt to Equity < 50%61.5%Fail
 Current Ratio > 1.31.38Pass
OpportunitiesReturn on Equity > 15%12.6%Fail
ValuationNormalized P/E < 2012.29Pass
DividendsCurrent Yield > 2%0%Fail
 5-Year Dividend Growth > 10%0%Fail
    
 Total Score 2 out of 10

Source: Capital IQ, a division of Standard & Poor's. Total score = number of passes.

Consolidated Graphics doesn't paint a pretty picture with its score of 2. The printing specialist has had trouble living up to Wall Street's expectations, and that spells trouble for shareholders.

Consolidated Graphics provides a number of printing services to businesses, including commercial and digital printing, print-related technology solutions, and mailing and fulfillment centers. Essentially, Consolidated Graphics allows its customers to outsource their printing needs, freeing them to focus on their own business.

The problem, though, is that the entire print services industry is struggling. Looking at Consolidated's major competitors, R.R. Donnelley (NAS: RRD) is growing even more slowly and is less profitable than Consolidated, while both Quad/Graphics (NYS: QUAD) and Cenveo (NYS: CVO) have lost money over the past 12 months. Even Deluxe (NYS: DLX) , which is best known for printing checks for bank customers, has seen revenue contract over the past five years.

In its most recent quarter, Consolidated saw modest rises in sales and earnings, but both fell short of what analysts had hoped to see. With weak future guidance as well, investors pushed shares well below their former lows for the year.

With cloud-based solutions emerging as a viable alternative for smaller businesses and corporate America trimming down overhead costs, old-style heavy-duty printing needs may fade into the sunset. That won't just keep Consolidated Graphics from reaching perfection; it could also become irrelevant in time.

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.

Click hereto add Consolidated Graphics to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our "13 Steps to Investing Foolishly."

At the time this article was published Fool contributorDan Caplingerdoesn't own shares of the companies mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.

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