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 DuPont (NYSE:DD) 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 DuPont'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 DuPont's key statistics:

DD Total Return Price Chart

DD Total Return Price data by YCharts

Passing Criteria

3-Year* Change

Grade

Revenue growth > 30%

14.6%

Fail

Improving profit margin

25.1%

Pass

Free cash flow growth > Net income growth

(53.5%) vs. 43.4%

Fail

Improving EPS

40.5%

Pass

Stock growth (+ 15%) < EPS growth

83% vs. 40.5%

Fail

Source: YCharts. * Period begins at end of Q2 2010.

DD Return on Equity Chart

DD Return on Equity data by YCharts

Passing Criteria

3-Year* Change

Grade

Improving return on equity

(2.4%)

Fail

Declining debt to equity

No debt

Pass

Dividend growth > 25%

9.76%

Fail

Free cash flow payout ratio < 50%

79.8%

Fail

Source: YCharts. * Period begins at end of Q2 2010.

How we got here and where we're going

DuPont is looking a little sickly today with only three out of nine possible passing grades. DuPont's net income had held relatively steady before its recent spike, but free cash flow has been in a steady decline. Investors have been chasing this stock for years, which has resulted in a share price growing far in excess of its underlying earnings. Is DuPont's post-crash rebound sustainable, or will the mediocrity of most of the company's fundamentals catch up to it eventually? Let's dig a little deeper.

DuPont's management blamed its recent underperformance on the Performance Chemical business, which largely constitutes Titanium Dioxide (TiO2) pigment -- this paint precursor's segment has suffered a 56% decline in operating income. My fellow Fool Neha Chamaria notes that the TiO2 market has been plagued by excess inventory lately, which has naturally resulted in a supply glutted price crash. DuPont may now divest that segment to create a "more concentrated" company, which will enable it to concentrate on more profitable businesses, like its Agricultural products. DuPont has also recently sold its Performance Coatings business to Carlyle Group (NASDAQ: CG) for a price of $5 billion.

DuPont's Agricultural segment grew 7% in the latest quarter, and now produces just over a third of its total revenues. The company also recently bought an 80% stake in South Africa's Pannar Seed. This could be bad news for Monsanto (NYSE:MON), currently the world's largest seed company and DuPont's evident prime competitor after adding up the balance of these major moves.

Chemical-industry peer Dow Chemical (NYSE:DOW) is also trying to expand further into the agriculture market while moving away from the uncertainties of chemical demand. Dow's Agricultural Sciences division posted 14% sales growth in the first quarter, while it has sold off its non-performing businesses for a total of $8 billion. Everyone needs to eat, but as more companies push harder into this competitive market, the end result is likely to be lower margins for everyone. At least farmers ought to see benefits from this intensified competition.

Putting the pieces together

Today, DuPont 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 has no position in any of the stocks mentioned. 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.