Which stock will outperform all others in 2010? The answer may surprise you: UPS (NYSE:UPS).

This recession has not been kind to UPS, or to its employees. When bastions of American manufacturing such as Ford (NYSE:F) and Motorola began cutting jobs and slashing benefits earlier this year, the company that moves such goods around the country was right there alongside 'em, wielding the hatchet. UPS management caught a lot of flak for this decision, but the business need was clear. Revenues for this year are down 15% so far; profits have been cut in half.

Things are tough all over
And employees aren't the only ones feeling the pain. UPS shares underperformed the S&P 500 by almost 20 percentage points over the last year -- and they still don't look much like an obvious bargain. The stock's selling for 35 times trailing earnings, and 22 times what analysts expect it to earn next year. Meanwhile, these same analysts fear that even an economic recovery won't help UPS grow earnings so much as 8% per year over the next five years.

Well, I've got just one word for 'em…

As this year's lockstep rate increases at FedEx (NYSE:FDX) and UPS demonstrate, UPS can nail down the bulk of these growth expectations practically at will. Population growth, a bit of inflation, and (dare we hope) even a modest return to growth for the economy at large should more than suffice to provide the balance.

It seems to me, therefore, that 8% growth is "in the bag." The real question is how much faster than 8% UPS can grow.

Well? How much faster can it grow?
Predicting the future is a Fool's game ... so I'll volunteer to take a swing at it. Over the past 12 months, UPS netted only $0.036 for every dollar of revenue that flowed through its business -- $1.64 per share over the past year. But the company has averaged something closer to a 7.4% margin over the last decade -- more than twice as much as it's earning right now.

Posit a "return to normal," therefore, and it seems reasonable to believe UPS can earn around $3.35 a share or more in the near future just based on current revenue. In which case, we would see the firm's P/E ratio shrink to something like 17 at current stock prices. Alternatively, should the firm maintain its current earnings multiple, the stock would have to double in price -- a fate few shareholders would lament.

How long might we have to await this happy day? I hesitate to guess -- the last time UPS booked less than $45 billion in annual revenues (the amount that analysts predict it will end up with in 2009) was 2005. And yet that year, UPS boasted net profit margins of 9.1% -- well above the decade's average. So I suspect UPS can return to its profit margins of yesteryear in relatively short order. All it really needs is for customers to begin buying and selling again, so that UPS can leverage the scale of its operations to earn more profit from its delivery routes.

How would this work? Well, think about it: Delivering two packages to a given street tomorrow involves only marginally more cost for UPS than delivering one package to the same street today. The truck uses a few fluid ounces more gas to haul the extra cargo. The driver idles a few seconds longer while he delivers the second package and rings the second doorbell. But all else being equal, revenue doubles -- and because the variable costs are so low, the vast bulk of any additional revenue UPS makes from greater shipping volume drops right to the bottom line.

Foolish minds think alike
I'm not the only investor thinking along these lines, either. A few months ago, JP Morgan (NYSE:JPM) upgraded UPS shares to "buy," pointing out that revenue declines cost UPS six percentage points of operating margin between 2007 and 2009, and that logically, a revival of the economy -- and of UPS's revenues -- should restore the lost margin just as quickly. You can also read Goldman Sachs' (NYSE:GS) recent endorsements of cardboard maker International Paper (NYSE:IP) and cardboard (box) mailer Amazon.com (NASDAQ:AMZN) as implied endorsements of an imminent revival in package volume. Once this happens, the improvement in margins, and profit, should follow in short order.

How short? Lacking any better yardstick, I'll defer to JP and its guess at two years from trough to peak as a likely scenario. But however long it takes to materialize, I think the bull thesis on this stock is crystal clear -- leaving investors with little to do but sit back, cash their 3.1% dividend checks, and wait for UPS to deliver.

Why, I do declare ... I think can hear the truck pulling in now.

Now tell us what you think. Vote in the poll below and let us know if you think UPS is the best stock for 2010.

Which is the best stock for 2010? See all 13 candidates here.

United Parcel Service is a Motley Fool Income Investor recommendation. Amazon.com and FedEx are Motley Fool Stock Advisor selections.

Fool contributor Rich Smith does not owns shares of any company named above. The Motley Fool has a disclosure policy.