Every investor can appreciate a stock that consistently beats the Street without getting ahead of its fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with improving financial metrics that support strong price growth. Let's take a look at what Corning's (NYSE:GLW) recent results tell us about its potential for future gains.

What the numbers tell you
The graphs you're about to see tell Corning's story, and we'll be grading the quality of that story in several ways.

Growth is important on both top and bottom lines, and an improving profit margin is a great sign that a company's become more efficient over time. Since profits may not always reported at a steady rate, we'll also look at how much Corning's free cash flow has grown in comparison to its net income.

A company that generates more earnings per share over time, regardless of the number of shares outstanding, is heading in the right direction. If Corning's share price has kept pace with its earnings growth, that's another good sign that its stock can move higher.

Is Corning managing its resources well? A company's return on equity should be improving, and its debt-to-equity ratio declining, if it's to earn our approval.

Healthy dividends are always welcome, so we'll also make sure that Corning's dividend payouts are increasing, but at a level that can be sustained by its free cash flow.

By the numbers
Now, let's take a look at Corning's key statistics:

GLW Total Return Price Chart

GLW Total Return Price data by YCharts.

Criteria

3-Year* Change

Grade

Revenue growth > 30%

56.7%

Pass

Improving profit margin

(41.2%)

Fail

Free cash flow growth > Net income growth

1,490% vs. 27.6%

Pass

Improving EPS

28.3%

Pass

Stock growth (+15%) < EPS growth

(13%) vs. 28.3%

Pass

Source: YCharts. *Period begins at end of Q3 2009.

GLW Return on Equity Chart

GLW Return on Equity data by YCharts.

Criteria

3-Year* Change

Grade

Improving return on equity

(18.7%)

Fail

Declining debt to equity

15.5%

Fail

Dividend growth > 25%

80%

Pass

Free cash flow payout ratio < 50%

42.1%

Pass

Source: YCharts. *Period begins at end of Q3 2009.

How we got here and where we're going
It's hard to argue with six out of nine passing grades here. Corning's major problem, which no doubt kept investors away last year, is a weakened profit margin that's hurt Corning's ability to improve its return on equity. Although Corning's debt-to-equity ratio has been on the upswing, the company recently took steps to reduce its outstanding debts, and with a cash hoard nearly double the amount of its outstanding debts, there's no reason to be concerned about the company taking advantage of borrowing rates that are at historically low levels. Free cash flow has grown very strongly over the past three years, but it started at virtually zero, and remains well below net income. Can Corning improve its fortunes enough in the upcoming year to turn that declining margin around?

The past year was quite the up-and-down one for Corning, which struggled mightily to keep its stock price above the level at which it began 2012. My fellow Fool Rich Smith offers a good recap of those ups and downs, from a false start in the first quarter to a surprising bounce in November after unexpectedly good guidance.

That guidance had bullish notes on both the company's cash-cow LCD segment and the next-big-thing Gorilla Glass segment, which has been adopted by both Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) in their popular mobile devices. An anticipated $1 billion revenue run rate on Gorilla Glass would be very impressive, except that the specialty materials segment it's part of has never generated meaningful profit. Corning has remained almost entirely dependent on the LCD-panel display technologies segment for a decade, and that segment has had far fatter margins from its earliest days than specialty materials has ever managed.

The problem, as Fool tech bureau chief Eric Bleeker points out, is that the purchase of a smartphone often precludes that consumer buying a big-screen TV or a new laptop or desktop, which offer much larger display areas that generate Corning greater earnings. As a quick comparison, one iPhone 5 has 6.7 square inches of display area. Corning needs Apple to sell 160 iPhones to equal the display area of a single 50-inch TV, and by all indications, that 50-inch TV generates much fatter margins for Corning than 160 iPhones. The same concerns have helped depress Universal Display (NASDAQ:OLED), which has had its display technologies primarily featured in Samsung smartphones, as OLEDs tend to jack up the price of TVs beyond what many consumers are willing to pay.

Ultimately, Corning's future as an investment may hinge on its ability to improve the profitability of its mobile glass coverings. That's something to watch when the company releases its next earnings report. Keep your eyes open for it later this month.

Putting the pieces together
Today, Corning has some of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.

The Motley Fool owns shares of Apple, Corning, Google, and Universal Display. Motley Fool newsletter services recommend Apple, Corning, Google, and Universal Display . Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.