(FORTUNE Magazine) – P.H. GLATFELTER CO. Like Candide, this paper manufacturer finds the most profit in cultivating its own garden. Over the past decade, Glatfelter's earnings increased 15% annually and return on assets averaged 12%, more than twice the industry norm. Last year the company took in $82 million on $569 million in sales, $3.40 per share, returning a bountiful 24% on shareholders' equity. Says Chief Executive T. C. Norris: ''If we know anything, we know a little bit about making paper and selling it. We think we ought to stick pretty close to that philosophy.'' Glatfelter is a tiny player in the commodity end of the business, where such billion-dollar heavyweights as International Paper and Weyerhaeuser compete. The 125-year-old company focuses instead on specialty markets, which are less susceptible to the notorious turns in the cyclical industry. Already the leading supplier of uncoated paper for trade books, Glatfelter entered another niche market, cigarette paper, with the 1987 acquisition of Ecusta for $220 million. One of the two domestic suppliers to the tobacco industry (the other is a division of Kimberly-Clark), Ecusta is enjoying substantial profits from the current export boom in cigarettes. Ecusta also produces the lightweight paper used to publish bibles, dictionaries, prospectuses, and other lengthy tomes. Under Norris, Glatfelter has also tended its balance sheet. It has a $110 million line of bank credit and will receive the repayment of a $158 million note in September, more than its current debt. That means the company, which has made two acquisitions in the past 15 years, could easily go shopping again. Its first choice would be another niche player in paper. Though some potential targets are selling at substantial discounts, don't look for an outbreak of hostilities. Says Gary Palmero, an analyst with Oppenheimer: ''Paper companies have started no unfriendly takeovers.'' John Chrysikopoulos and Bruce Kirk, analysts with Goldman Sachs, forecast 1989 earnings of $4 per share, up 18%, on sales of $629 million. But Glatfelter may not be able to sustain that growth without an acquisition. The Spring Grove, Pennsylvania, company is not itself a takeover stock -- about one-third of its outstanding shares are held by the Glatfelter family. Most analysts consider the stock to be fairly valued at its recent 52- week high of $47.75 share. But security analyst Louis Marckesano of the Philadelphia firm Janney Montgomery Scott says the stock could reach $55 within a year.

CORDIS CORP. After years of legal woes over the allegedly faulty pacemakers it produced, this medical device manufacturer is finally getting to the heart of the matter. It sold the pacemaker business in 1987, settled the major claims against it for $5.7 million in April, and is now turning its attention to coronary catheters. Cordis aims to maintain its leading share in the diagnostic catheter business and to enter the growing interventional market through new products such as balloon catheters, which unclog blocked arteries. Results for the first nine months of fiscal 1989 were disappointing: Income from continuing operations dropped 28%, largely because of slowing sales and higher development costs. But security analyst Carol Winslow of the Minneapolis investment firm Dain Bosworth predicts Cordis will be profitable again in fiscal 1990 with earnings of $15 million on sales of $170 million. Its stock traded recently at $16.50 a share. The company is often mentioned as a takeover prospect.

EKCO GROUP Wanted: one decidedly low-tech company with little risk of obsolescence, a strong brand name, significant market share, established cash flow. Robert Stein found exactly what he wanted in Ekco, a maker of bakeware and other kitchen tools and gadgets. He sold the unprofitable dot-matrix printer business of Centronics Data Computer in 1987 and acquired Ekco for $125 million. Last year Stein changed Centronics' name to Ekco Group. In January he bought Woodstream, a maker of tackle boxes and toolboxes, and he is looking for his next purchase. Meanwhile, the company has almost completed a buying spree for up to about $15 million of its own shares. Ekco earned $3 million on sales of $135 million last year. Its stock recently traded at $3 a share. Says Stein: ''We think our stock is undervalued, quite frankly, when you look at the cash flow.'' The 40 cents per share in cash flow does look a lot better than the company's earnings per share -- 17 cents.

TSENG LABS When he founded this company six years ago, Jack Tseng studied its overhead each month to determine the sales needed to sustain the business. Says Tseng: ''The strategy worked very well.'' The company has been profitable every year, earning $3.2 million on sales of $21.5 million last year. Tseng Labs designs integrated circuits and boards to enhance the graphics of IBM and IBM- compatible personal computers. Being in the specialized end of the business, it can charge high prices. Says analyst William Miller of Rutherford Brown & Catherwood, a Philadelphia investment firm: ''Tseng has proprietary technology and maintains 15% after-tax margins because it does not compete by price alone.'' The company's challenges will be to keep its technological lead and to diversify. Karen Payne, an analyst with Butcher & Singer, another Philadelphia investment firm, recommends the stock, which keeps setting new highs. Recently it sold for $3.65 a share.