Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Jamba (NASDAQ:JMBA) fit the bill? Let's take a look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell Jamba's story, and we'll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's take a look at Jamba's key statistics:

JMBA Total Return Price Chart

Source: JMBA Total Return Price data by YCharts.

Passing Criteria

3-Year* Change 

Grade

Revenue growth > 30%

(24.2%)

Fail

Improving profit margin

35.1%

Pass

Free cash flow growth > Net income growth

431.8% vs. 92.7%

Pass

Improving EPS

93.8%

Pass

Stock growth (+ 15%) < EPS growth

69.6% vs. 93.8%

Pass

Source: YCharts. * Period begins at end of Q4 2009.

JMBA Return on Equity Chart

Source: JMBA Return on Equity data by YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

76.2%

Pass

Declining debt to equity

No debt

Pass

Source: YCharts. * Period begins at end of Q4 2009.

How we got here and where we're going
Despite showing unprofitability on its earnings reports, the free-cash-flow positive Jamba has moved in the right direction in virtually all respects except for revenue. That's earned it an unexpectedly strong six out of seven passing grades, a true rarity for a company with red ink on the bottom line. It's proof positive that what's ultimately more important to investors is making money rather than simply making sales. Investors clearly believe that this momentum will continue, but let's dig a little deeper to make sure that this juice isn't going to turn sour.

At the start of the year, investors were asking whether Jamba could keep growing in the face of intensifying competition, most notably from Starbucks, which has moved into juices through several acquisitions in 2012. There are a few ways to do that independently, but the word "buyout" was on Jamba watchers' lips. A large fast-food franchise could easily gobble up the small-cap star, and my fellow Fool Dan Caplinger notes that Monster Beverage could enjoy some healthful synergies by expanding its energy-enhanced juice lines into more standard juice fare. This might help ease some regulatory scrutiny, and provide a storefront presence -- but Starbucks might be the better buyout partner in the end. Both companies compete for the same limited consumer appetites in the same fast-food business model, and Jamba's comparatively minuscule sales volume would likely be enhanced by Starbucks' branding and marketing expertise.

It seems like Jamba may need the help, as its most recent earnings were a bit flatter than expected. Overall sales are growing, but very modestly, which makes it difficult to project similar growth to what we've seen in the graphs above. Still, it's possible that a strong summer sales season will outweigh the cold-weather weakness, and Jamba might move into profitable territory for the first time ever. The company is pushing hard to expand self-serve JambaGO stations into schools and other captive environments, which could provide a steadier stream of revenue over retail outlets that have to generate interest from afar. Jamba isn't ignoring its retail storefronts, though -- earlier this year, the company fired a healthy broadside at kids' meal leader McDonald's with a chainwide rollout of Jamba Kids Meals. Granted, a burger and fries with a toy are more fun than a smoothie and a sticker, but there are plenty of yuppie parents who will appreciate the alternative, even if their children won't.

Putting the pieces together
Today, Jamba 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 has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald's, Monster Beverage, and Starbucks. 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.