Everyone would love to find the perfect stock. But will you ever really find a stock that gives you everything you could possibly want?

One thing's for sure: If you don't look, you'll never find truly great investments. So let's first take a look at what you'd want to see from a perfect stock, and then decide if Piper Jaffray (NYSE: PJC) fits the bill.

The quest for perfection
When you're looking for great stocks, you have to do your due diligence. It's not enough to rely on a single measure, because a stock that looks great based on one factor may turn out to be horrible in other ways. The best stocks, however, excel in many different areas, which all come together to make up a very attractive picture.

Some of the most basic yet important things to look for in a stock are:

  • 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 don't mean anything if a company can't turn them into profits. Strong margins ensure a company is able to turn revenue into profit.
  • Balance sheet. Debt-laden companies have banks and bondholders competing with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Companies need to be able to turn their resources into profitable business opportunities. Return on equity helps measure how well a company is finding those opportunities.
  • Valuation. You can't afford to pay too much for even the best companies. Earnings multiples are simple, but using normalized figures gives you a sense of how valuation fits into a longer-term context.
  • Dividends. Investors are demanding tangible proof of profits, and there's nothing more tangible than getting a check every three months. 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 Piper Jaffray.

Factor What We Want to See Actual Pass or Fail?
Growth 5-Year Annual Revenue Growth > 15% 4.7% Fail
  1-Year Revenue Growth > 12% 13.9% Pass
Margins Gross Margin > 35% 91.7% Pass
  Net Margin > 15% 4.6% Fail
Balance Sheet Debt to Equity < 50% 67.2% Fail
  Current Ratio > 1.3 1.32 Pass
Opportunities Return on Equity > 15% 3.1% Fail
Valuation Normalized P/E < 20 14.76 Pass
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
  Total Score   4 out of 10

Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.

Piper Jaffray's score of 4 doesn't make it look particularly perfect. The investment bank isn't as well-known as its Wall Street counterparts, but it has some of the same opportunities and faces many of the same challenges.

Piper Jaffray is a Minneapolis-based financial company that provides asset management, trading, investment research, and access to capital markets through stock and debt offerings. Originally part of US Bancorp (NYSE: USB), Piper became independent at the end of 2003.

As you'd expect, Piper took a beating during the financial crisis, but the company's stock didn't take the same trajectory as most of its peers. Shareholders suffered bigger losses in 2007 than peer Morgan Stanley (NYSE: MS) but then lost only 14% more in 2008. Yet while Goldman Sachs (NYSE: GS) saw shares double in 2009, Piper only managed an anemic 27% jump and then fall a whopping 31% last year.

The results come from questionable fundamentals. Piper's margins are well below those of Goldman and Morgan Stanley. Due in part to its relatively unleveraged balance sheet, Piper also underperforms its peers on return on equity.

More recently, though, things have started looking up for the company. In its most recent quarter, Piper reported a big jump in adjusted net income. But with the good news coming largely from great results at the company's trading desk, Piper's financial results can be volatile from quarter to quarter.

As an off-Wall Street investment firm, Piper is an interesting way to play financial services from outside the nation's financial capital. As a stock, though, Piper has a long way to go before it reaches perfection.

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.

Add Piper Jaffray to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our 13 Steps to Investing Foolishly.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. 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.