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 Skyworks Solutions, Inc. (NASDAQ:SWKS) 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 Skyworks' 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 Skyworks' key statistics:

SWKS Total Return Price Chart

SWKS Total Return Price data. Source: YCharts.

Passing Criteria

3-Year* Change

Grade

Revenue growth > 30%

52%

Pass

Improving profit margin

9.9%

Pass

Free cash flow growth > Net income growth

216.4% vs. 67%

Pass

Improving EPS

63.4%

Pass

Stock growth (+ 15%) < EPS growth

34% vs. 63.4%

Pass

Source: YCharts. * Period begins at end of Q1 2011.

SWKS Return on Equity (TTM) Chart

SWKS Return on Equity (TTM) data. Source: YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

4.1%

Pass

Declining debt to equity

No debt

Pass

Source: YCharts. * Period begins at end of Q1 2011.

How we got here and where we're going
We took a look at Skyworks last year, and it now comes through with flying colors to rack up a rare perfect score in its second assessment -- although it only required one more pass to get there. In the process, Skyworks has given shareholders a near double, as its stock price is 80% higher today than it was when we looked at it in 2013. The company's now recovered from a downturn in its free cash flow that lasted through most of 2012, which allowed it to capture the only passing grade out of its reach last year. However, Skyworks' revenue and net income growth rates have moderated since last year, and this could raise some concerns for shareholders if the slowdown continues. Will Skyworks regain the mojo in its growth momentum this year? Let's dig a little deeper to find out.

Skyworks recently crushed Wall Street's estimates on both top and bottom lines for its fiscal second quarter due to its strong supply agreements with smartphone leaders Samsung and Apple (NASDAQ:AAPL). Skyworks also provided promising third-quarter guidance, which rides on the strength of its mobile connectivity portfolio. My fellow writer Amal Singh notes that the company is poised to capitalize on its new 802.11ac Wi-Fi chip, which can support set-top boxes, 4G LTE services, and super-high-def televisions. Skyworks appears to be targeting the LTE handset market as global telecom providers have been aggressively building out LTE networks in over 50 international markets, particularly in rapidly growing emerging markets such as China. Apple's recent deal with China Mobile (NYSE: CHL) will give it access to more than 700 million subscribers, which should further expand Skyworks' addressable market.

According to Credit Suisse, LTE handset volumes will double to 537 million units this year, and will grow by another 33% per year for the next several years, which is clearly a monster opportunity for Skyworks -- and for its rivals TriQuint (NASDAQ:TQNT) and RF Micro Devices (NASDAQ:RFMD). These competitors recently agreed on a merger to secure more business from mobile top dogs Apple and Samsung. Apple and Samsung together accounted for nearly half of Skyworks' revenue in fiscal 2013, so this is clearly a threat that could diminish its otherwise-sterling growth prospects.

My fellow writer Harsh Chauhan notes that Skyworks' 802.11ac chips have also been gaining traction in Internet of Things applications, which is projected to become a $19 trillion worldwide market in the coming years. According to Morgan Stanley, there will be 75 billion connected devices by 2020, providing a huge opportunity for Skyworks thanks to its strong relationship with Google and its newly acquired smart-home development subsidiary Nest.

Skyworks has also joined hands with Panasonic in a joint venture focused on the design and development of high-performance wireless-signal filters, providing another angle of entry into the mobile connectivity and Internet of Things markets. Skyworks will contribute $148.5 million in cash for a 66% stake in the joint venture, while Panasonic retains the other third of the company. Earlier this year, Skyworks also introduced other products to bolster its position in smartphones: antenna switch solutions for high-speed (LTE) wireless connectivity and a dual-LED flash driver for smartphone cameras called TrueFlash. According to Gartner, 90% of smartphones worldwide -- an estimated 2.2 billion units -- will sport cameras by the end of next year, so Skyworks now has a chance to earn placement in many millions of new smartphones in two different ways -- Wi-Fi connectivity and camera control.

Putting the pieces together
Today, Skyworks has many 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.

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Alex Planes has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google (A and C shares). It owns shares of TriQuint Semiconductor. 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.