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 Modine Manufacturing (NYSE: MOD) 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 Modine.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% (2.7%) Fail
  1-Year Revenue Growth > 12% 25.9% Pass
Margins Gross Margin > 35% 16.3% Fail
  Net Margin > 15% (1.1%) Fail
Balance Sheet Debt to Equity < 50% 45.9% Pass
  Current Ratio > 1.3 1.41 Pass
Opportunities Return on Equity > 15% (3.6%) Fail
Valuation Normalized P/E < 20 132.36 Fail
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
       
  Total Score   3 out of 10

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

Modine doesn't come close to perfection with a score of 3. Despite past problems in its core business, though, things may be looking up for the company.

The resurgence in the auto industry has gotten plenty of headlines, as General Motors (NYSE: GM) has bounced back from bankruptcy with a bang and Ford (NYSE: F) has shown unparalleled strength despite not undergoing the debt-cleansing that bankruptcy gave its Big Three counterparts.

What's escaped notice is the impact automakers have had on parts makers like Modine, which makes heating and cooling systems not only for passenger vehicles but also for commercial and off-highway vehicles, with Caterpillar (NYSE: CAT) and Deere (NYSE: DE) among its major customers. Shares of Modine are up 77% in the past year and have jumped nearly eightfold since early 2009.

Modine has returned to profitability with three straight quarters of gains, but it still has plenty of work to do. Nevertheless, if the recovery continues to gain strength, Modine is in a nice position to benefit.

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.

Click here to add Modine Manufacturing 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. General Motors is a Motley Fool Inside Value recommendation. Ford Motor is a Motley Fool Stock Advisor selection. 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.