Companies’ Performances Are Getting Easier to Compare : Investing: SEC ruling requires firms to publish a performance graph showing how earnings fared against similar stocks.

Shareholders interested in comparing the value of their stocks to the pay of the executives running or ruining those companies should find the chore much easier these days.

Securities and Exchange Commission rules adopted last year require companies whose 1992 fiscal year ended Dec. 31 or later to publish an annual performance graph that compares their five-year return to shareholders to the performance of similar stocks and stock indexes.

Dozens of Orange County’s public companies published the graphs this year--most often in the proxy statements mailed to stockholders in advance of their annual meetings. The remaining companies must have the graphs by next year.

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As might be expected in a year of regional recession and a sluggish national economy, those graphs don’t paint very pretty pictures.

More than half the Orange County companies’ graphs report performance that fell below their peers and the market as a whole.

But among those companies that did better, however, one local company’s performance was phenomenal.

In a year when its profits soared 70% to $43.6 million, PacifiCare Health Systems Inc. reported that $100 invested in its common stock back in 1987 would have been worth $1,541.76 at the end of 1992.

By comparison, the Cypress-based medical care provider said the value of $100 invested in the stocks in the Standard & Poor’s Health Care Composite Index would have grown to just $186.99, while $100 worth of the S&P; 500 Index stocks--a popular gauge of the overall stock market--would have been worth $153.64.

PacifiCare officials opted not to do what some companies have tried: devising its own index of three “peer group” companies for comparison purposes.

“It is more difficult to customize a peer group to your company,” a company spokeswoman said. “The standard index is easier.”

Some consultants and business executives have spotted a potential flaw in the SEC’s decision to allow a company to pick its own comparison companies.

“Of all the new disclosure regulations, that gave the companies the most difficulty,” said Lawrence Wangler, managing partner of the Newport Beach office of TPF & C, the compensation arm of Towers Perrin, an international benefits consulting firm. “In many cases, the companies were trying to position themselves as best they could with their peer group. You have to look at it very carefully.”

A company that wanted to make itself look better than it really is could select only the worst performing firms in its industry as peers, he said.

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One Orange County company whose stock performance has been less than stellar found itself being used that way.

Suzanne Hovdey, a spokeswoman for Community Psychiatric Centers, said she was surprised to see the Laguna Hills-based psychiatric hospital chain included in the peer group selected by U.S. Healthcare, a managed care firm in Blue Bell, Pa.

“The only thing we have in common is we are both involved in the medical profession,” she said.

But Community Psychiatric’s declining stock value apparently made U.S. Healthcare’s performance look stronger by comparison.

Community Psychiatric, meanwhile, compared its performance to three it selected--National Medical Enterprises Inc., Ramsay Health Care Inc. and Comprehensive Care Corp.--and admitted to shareholders that it didn’t compare very well.

Community Psychiatric’s graph showed that a $100 investment in its common stock in 1987 would have shrunk to $51 at the end of 1992.

By contrast, $100 worth of the peer group companies’ stocks would have grown to $162, and $100 invested in the Standard & Poor 500 index would have more than doubled to $222.

“We didn’t try to mask anything,” Hovdey said. “This is how we did.”

While none of the three companies exactly mirrors Community Psychiatric’s emphasis on psychiatric services, they were the best examples the company could find, she said.

In fact, Hovdey said Community Psychiatric excluded Sierra Tucson Companies Inc., a psychiatric clinic operator in Arizona that suffered a 96% drop in its 1992 profit to $365,506, because it is a much smaller company. Its inclusion could have made Community Psychiatric’s performance look better.