Fire Your Stock Analyst!

304Fire Your Stock Analyst!held numerous other prestigious positions. Another board member wasan Impath cofounder and is a prominent pathologist. The third boardmember was the dean of an applied life sciences school and a cofounderand CEO of a biological life sciences firm. The fourth board memberwas the CEO of a medical research firm. The fifth board member wasvice president of a unit of Bristol-Meyers Squibb. Only one board member,an attorney, was not actively involved in the medical profession.Instead of investment bankers and venture capitalists, Impath’sboard was packed with top-notch movers and doers in Impath’s industry.I ranked Impath’s key executive and board quality as excellent.CLEAN ACCOUNTING/EARNINGS GROWTH STABILITYThe clean accounting test totals the firm’s one-time charges consistingof (1) unusual expenses, (2) restructuring charges, (3) purchasedR&D, (4) extraordinary items, (5) accounting changes, and (6) discontinuedoperations found on its annual income statements, and comparesthat total to annual sales. Persistent one-time charges exceeding 3 percentof sales define a firm’s accounting practices as unclean.Impath’s total one-time charges versus sales amounted to zeropercent in its 1997, 1998, and 1999 fiscal years, qualifying Impath’s accountingas clean.The earnings growth stability test requires a visual look at thefirm’s quarterly earnings history to gauge its earnings volatility. Table17-9 shows Impath’s quarterly earnings history as found on Multex Investor’sHighlights report.TABLE 17-9 Impath’s quarterly earnings.Quarters 1997 1998 1999 2000March 0.10 0.17 0.22 0.36June 0.16 0.22 0.28September 0.16 0.25 0.30December 0.22 0.23 0.21Total 0.64 0.87 1.01