To really understand a stock, you just have to get down and dirty, break out your pencil, and really weigh the risk-versus-reward potential of the company you're following. Let's look at the good and the bad at KeyCorp (NYSE: KEY), to see whether the stock is a good value or a potential money pit.

The good
After suffering through the worst financial crisis in 70 years, KeyCorp looks like it's turning the corner, with three consecutive profitable quarters under its belt. I'm particularly impressed by its quickly rising tier 1 ratio, which measures a bank's financial strength and ability to meet its obligations. KeyCorp's most recent measure of 9.31% in the fourth quarter marks a big jump from its low point of 7.27% in July 2009, and demonstrates that the bank is well-capitalized and should hopefully be able to withstand economic hiccups going forward.

Its return to profitability has a lot to do with reigning in expenses and decreasing its loan loss reserves. During the height of the housing crisis, as the credit quality of its loan portfolio declined, the company was forced to put aside extra money to cover the impending writedowns that ensued. Loan loss reserves have fallen sequentially over the past four quarters, from 4.52% of all loans to just 3.20%, which signifies to me that its portfolio's credit quality has vastly improved.

The bad
The one stigma still haunting KeyCorp: It's one of four banks that hasn't yet repaid its TARP borrowings. Ally Financial (previously GMAC), SunTrust (NYSE: STI), and Regions Financial (NYSE: RF) are the other three. Of the four, KeyCorp maintains the highest tier 1 ratio, but it may nonetheless still be required to bring a dilutive share offering to market in order to raise the capital required to pack back the Treasury. CEO Henry Meyer expects any offering the company might issue to be less painful now than it would have been during the crisis, but any uncertainty could severely shake shareholder confidence.

Then we have the actual figures themselves, which might cause long-term shareholders to stick their heads in the sand, ostrich-style. Until 2010, full-year revenue had declined dramatically every year since 2007. While the rest of the economy has perked up, KeyCorp's revenue has now merely stabilized, and the company's projected five-year growth rate is a paltry 4.8%. Cutting costs will only mask organic growth weakness for so long.

The takeaway
The free ride for dividend-seeking shareholders left the station years ago. Now investors have to figure out whether a company trading slightly below book value could be a bargain-basement long-term winner. The way I see it, as long as KeyCorp can continue to reduce its non-performing assets, its earnings potential should continue to rise, even if revenue growth remains relatively flat. If anything, after it repays its TARP loan, the company could be an attractive acquisition target for a larger bank.

The sole question remaining now: How much capital does it need to raise to repay TARP? Only time will give us that answer.

Do you have an opinion on the future of KeyCorp? Share your thoughts in the comments section below.

Want to keep track of KeyCorp, to see how it reacts when it does repay its TARP loans? Add it to your Fool watchlist.

Fool contributor Sean Williams does not own shares in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy that you can bank on.