With better-than-expected results in the most recent quarter and the stock rallying 165% over the trailing 12 months, it's tempting to think of iRobot (NASDAQ:IRBT) stock as more than capable of weathering a market downturn. But is it? Expensive household robots for cleaning floors and pools aren't exactly must-haves for every market, even if 80% of consumers who buy the cuddly Roomba vacuum name it as if it were a pet.

Diligent investors nervous about whether iRobot is a durable stock for the long term may want to apply three standard tests to find out for sure: Check the balance sheet, check the management's track record for investing, and check on the long-term strategy for the business.

iRobot's Roomba cleaning a hardwood floor.

The Roomba is a hit with millions, but iRobot has bigger ambitions. Image source: Getty Images.

More on each of these areas in a minute. First, let's do what amounts to the open-wide-and-say-ahhhh test for stocks: How is iRobot growing, and how does that compare with recent history?

Looking first at revenue, iRobot reported 23.2% growth year over year in the second quarter, continuing a trend of 20% growth on the top line from Q1, when revenue soared 28.8%. That's impressive momentum that management attributed to partly to strong sales on Amazon.com's Prime Day plus new Roomba models available in key territories, including China and the Europe, Middle East, and Asia (EMEA) region. 

Earnings per share have also improved nicely -- up 346.2% and 58.8%, respectively, over the past two quarters -- fueling what to some must feel like a premium valuation for the stock. Today, iRobot trades for 51 times earnings and 3.6 times total revenue, according to S&P Market Intelligence. Continued growth -- especially accelerating growth -- would support buying at present levels. Let's dig into our three tests to determine the likelihood of seeing that occur.

Flush with cash, and producing more each quarter

Let's start with the really good news: iRobot has plenty of capital to work with. According to S&P Market Intelligence, the company has $260.1 million in cash and short-term investments and no debt. Cash flow from operations quadrupled last year and has more than doubled over the trailing 12 months, to $113.6 million. A strong balance sheet is crucial for a market downturn, since it allows management the flexibility to keep investing when others may be strapped for cash -- and get better terms in the process.

Better margin, increasing returns

While iRobot has spent some years transitioning out of the defense business to focus on household robots such as the Roomba and the still-youthful Braava robot mop, management has been careful to price effectively and invest scarce resources without taking on mountains of new debt. Gross margin, in particular, has expanded from 44.6% in 2012 to 49.8% over the trailing 12 months. Returns on capital have been rising over the same period and hit double digits (11.7%) over the trailing 12 months, a level not seen since 2011 and only the the third appearance in iRobot's history. 

And what is the company doing in response? Investing further, which is exactly what Foolish investors should want to see.

"With our increased expectations for full-year revenue, we plan to reinvest a portion of the incremental profitability to capitalize on the strong U.S. and EMEA momentum and ensure our continued product leadership in a rapidly growing, competitive marketplace, "Colin Angle, chairman and chief executive officer of iRobot, said in a statement from the most recent quarter's press release. "We will make incremental [sales and marketing] investments to further promote our Braava family of robots, building on the momentum we have seen over the past couple of quarters. In addition, we will make additional investments in R&D to accelerate our product road map in anticipation of new product launches in 2018." 

The right kind of acquisitions

Finally, it's important to note where iRobot is investing to get growth. Betting on low-margin acquisitions just to add sales volume is usually a bad idea, for example. Here, iRobot is buying out distributors in Japan and EMEA to better control how its products are branded, marketed, and sold. Also, cutting out the middleman should improve margin even more than it's been improving so far. The latest deal, for Europe's Robopolis, will consume $141 million in cash in exchange for direct control over roughly 50% of iRobot's sales in the EMEA region. Management expects the acquisition to begin boosting per-share earnings in 2018 -- again, without taking on debt or materially hurting the company's ability to generate and store up capital for use elsewhere. Everyone wins, especially investors with an eye for the long term. 

While there's no way to predict for sure whether a downturn in the stock market would take iRobot stock with it, it's more likely we'll see a continued rally if the company continues to execute in these three areas.

Tim Beyers has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.