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 Boeing (NYSE:BA) 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:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Boeing.

Factor

What We Want to See

Actual

Pass or Fail?

Growth

5-Year Annual Revenue Growth > 15%

3.5%

Fail

 

1-Year Revenue Growth > 12%

18.0%

Pass

Margins

Gross Margin >
35%

17.3%

Fail

 

Net Margin > 15%

5.7%

Fail

Balance Sheet

Debt to Equity < 50%

190.1%

Fail

 

Current Ratio > 1.3

1.22

Fail

Opportunities

Return on Equity > 15%

81.6%

Pass

Valuation

Normalized P/E < 20

14.35

Pass

Dividends

Current Yield > 2%

2.5%

Pass

 

5-Year Dividend Growth > 10%

5%

Fail

       
 

Total Score

 

4 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Boeing last year, the company has picked up a point, with a jump in revenue. The stock has been less exciting, rising about 10% in the past year.

Boeing's business has been stronger than ever lately, with big orders coming in from around the world. Although the company's long-planned 787 Dreamliner airplane gets most of the attention from the media, its 737 MAX revamp of one of its most popular aircraft models is a massive step forward in fuel efficiency. That's a big part of why General Electric's (NYSE:GE) Capital Aviation Services, Southwest Airlines (NYSE:LUV), and United Continental (NYSE:UAL) each ordered 100 or more of the planes back in July.

Despite strength in orders, everything hasn't gone right for Boeing. Back in August, Qantas decided to cancel its order for 35 Dreamliner aircraft as it sought to save the $8.5 billion it would have to spend. Nevertheless, with close to $375 billion in order backlog, a few cancellations aren't going to hurt the company that much.

But Boeing could soon face a much bigger challenge. With a proposed merger of Airbus parent EADS and British Aerospace parent BAE Systems, Boeing's traditional rival could get a whole lot stronger. Interestingly, though, the bigger threat from the merger is from the defense side of the business, because BAE and Boeing compete for second place behind Lockheed Martin (NYSE:LMT) for the most defense-related revenue.

For Boeing to improve, it needs to eliminate further delays on the Dreamliner and get production ramped up as quickly as possible. If it can keep its commercial customers happy, then any concerns on the defense side should be a lot less important in terms of getting Boeing toward perfection.

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.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Lockheed Martin. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. 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 a disclosure policy.