Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is the Perfect Stock for 2012?

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 (Nasdaq: ACOM  ) 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


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 21.4% Pass
  1-Year Revenue Growth > 12% 35.9% Pass
Margins Gross Margin > 35% 83.4% Pass
  Net Margin > 15% 15.1% Pass
Balance Sheet Debt to Equity < 50% 0% Pass
  Current Ratio > 1.3 0.54 Fail
Opportunities Return on Equity > 15% 17.1% Pass
Valuation Normalized P/E < 20 25.47 Fail
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
  Total Score   6 out of 10

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

With six points, has put up a good history of promising financials. The company is still in its hyper-growth phase, but the challenge will be what it comes up with to sustain growth as it matures. provides a wide range of genealogical information and search tools for those seeking to learn more about their family trees. Although free search engines are competitors to an extent, counts on its specialized tools being worth paying for -- and so far, plenty of subscribers have proven them correct.

But last summer, dared to touch the third rail of paid-subscription sites: It bumped up its monthly rates while boosting discounts for longer-term subscriptions. By doing so, the company is trying to build the more reliable revenue streams that the subscription-based TiVo (Nasdaq: TIVO  ) and Sirius XM Radio (Nasdaq: SIRI  ) have -- even though lacks the upfront hardware costs that tend to tie TiVo and Sirius XM customers to longer-term relationships. At the same time, obviously wants to avoid the fate of Netflix (Nasdaq: NFLX  ) , which made the mistake of counting too much on customers to pay a huge subscription-rate increase. Like Netflix, has seen its shares plunge from their summer highs, but not to the same extent as the streaming giant.

Just yesterday, announced some strong news. At the end of 2011, the company had more than 1.7 million paying subscribers, considerably above its previous guidance. Monthly churn rates also fell, showing that customers are sticking with the service longer.

For to get closer to perfection, it needs to get to the point where it has enough cash on hand to keep its current ratio higher while also paying a dividend. In time, should get to that point, even if it takes a while for it to reach that goal.

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.

Finding the perfect stock is only one piece of a successful financial strategy. Get a big-picture view on preparing for the long haul by reading the Fool's special report, "The Shocking Can't-Miss Truth About Your Retirement." It's free, but available for only a limited time, so click here and grab your copy today.

Click here to add to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Netflix and 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.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1753517, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:22:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ACOM $0.00 Down +0.00 +0.00% CAPS Rating: ***
NFLX $127.50 Up +4.15 +3.36%
Netflix CAPS Rating: ***
SIRI $4.15 Up +0.02 +0.48%
Sirius XM Radio CAPS Rating: **
TIVO $19.90 Down -0.10 -0.50%
TiVo CAPS Rating: **