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 ATP Oil & Gas (Nasdaq: ATPG) 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 ATP Oil & Gas.

Factor What We Want to See Actual Pass or Fail?
Growth 5-Year Annual Revenue Growth > 15% 23.4% pass
  1-Year Revenue Growth > 12% 35.8% pass
Margins Gross Margin > 35% 69.3% pass
  Net Margin > 15% (46.1%) fail
Balance Sheet Debt to Equity < 50% 386.3% fail
  Current Ratio > 1.3 0.93 fail
Opportunities Return on Equity > 15% (31.5%) fail
Valuation Normalized P/E < 20 NM fail
Dividends Current Yield > 2% 0.0% fail
  5-Year Dividend Growth > 10% 0.0% fail
  Total Score   3 out of 10

Source: Capital IQ, a division of Standard and Poor's. NM = not meaningful; ATP Oil & Gas had negative earnings during the period. Total score = number of passes.

ATP Oil & Gas only manages to score 3 points, which isn't a very positive showing on our 10-point scale. Given the unique challenges that the company has faced in the past year, however, it's a good sign that the deepwater driller has made it this far. Going forward, things could finally be looking up for the company.

A year ago, the future looked bright for ATP. It had a promising site in the deep waters of the Gulf of Mexico that was about to start production. When the first Telemark well started producing, investors bid up shares, confident that the company could use its proceeds to start paying down debt.

But then Transocean's (NYSE: RIG) Deepwater Horizon rig went down, and the ensuing moratorium following the Gulf oil spill disaster raised fears that companies like ATP would no longer be viable, spurring many companies to reduce their exposure to the Gulf. Plains Exploration & Production (NYSE: PXP), for instance, sold off its Gulf operations to McMoRan Exploration (NYSE: MMR) in order to reduce expensive capital expenditures and resolve uncertainty about Gulf drilling going forward. ATP, however, maintained its commitment to its major investment.

Recently, the Gulf moratorium has lifted, and ATP's production has increased with a second well at Telemark. Although new deepwater permits are still difficult to get, ATP at least has its foot in the door -- and if things get back to normal, the company's successes during 2010 could multiply greatly.

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 ATP Oil & Gas 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 in this article. The Fool owns shares of Transocean. 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.