The "Heard on the Street" column in Monday's Wall Street Journal takes a look (subscription required) at struggling bond and mortgage insurer Radian Group (NYSE: RDN), which reported first quarter earnings of $195.6 million. With a market cap of less than $500 million, the stock looks cheap. But wait! There's more:

Excluding the impact of net unrealized gains on derivatives and hybrid securities, the Company's net operating loss was $215.2 million and the net operating loss per share was $2.69 for the quarter ... Given the significant widening of Radian's credit default swap spread over the past year, the reduction in the valuation of the Company's derivative liabilities related to non-performance risk more than offset the credit spread widening on underlying collateral for the current quarter.

If any of that made sense to you, there's a good chance you didn't fit in real well in high school.

As the Journal explained, "Radian hasn't done anything wrong. It properly applied the new rule and clearly flagged its impact when it reported earnings last week. Others might not be so forthright, meaning investors will have to be even more sharp-eyed as the credit crisis plays itself out."

And that's where many investors are likely to get screwed. The presence of sites that offer pages of ratios and spreadsheets have made looking for undervalued stocks easier than ever. But because those numbers don't include any of the color that lets investors assess quality of earnings -- far more important than the numbers themselves -- anyone who buys stocks based on the ratios without reading the underlying SEC filings is likely to find himself (And yes, only men would invest money based on such shoddy analysis) in a world of hurt.

Moral of the story: use services like AOL Key ratios pages as starting points for research. But never, ever, ever take those numbers at face value. Log-on to Sec.gov and read the filings yourself. I don't even want to think about how many millions of dollars naive investors have lost basing trades on a cursory glance at key ratios.

To learn more about digging into the numbers and assessing earnings quality, check out the great Thornton O'Glove's Quality of Earnings: The Investor's Guide to How Much a Company is Really Making.