Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock and then decide whether Quepasa (AMEX: QPSA) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. Although past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that a company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Moneymaking opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. 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 Quepasa.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 58.2% Pass
  1-Year Revenue Growth > 12% 911.1% Pass
Margins Gross Margin > 35% 100.0% Pass
  Net Margin > 15% (68.6%) Fail
Balance Sheet Debt to Equity < 50% 48.4% Pass
  Current Ratio > 1.3 11.90 Pass
Opportunities Return on Equity > 15% (128.0%) Fail
Valuation Normalized P/E < 20 NM NM
Dividends Current Yield > 2% 0.0% Fail
  5-Year Dividend Growth > 10% 0.0% Fail
       
  Total Score   5 out of 9

Source: Capital IQ, a division of Standard & Poor's. NM = not meaningful because of negative earnings. Total score = number of passes.

What's happening with Quepasa? Its score of 5 doesn't give it much of a relationship with perfection, but the social-networking company wants to get to know it better.

With everyone going gaga over Facebook and Twitter, the problem for investors is that those big names haven't gone public yet. The rabid popularity of other social-media investments, including OpenTable (Nasdaq: OPEN) and Travelzoo (Nasdaq: TZOO), reveals just how hungry investors are for ways to make money on the next big trend. And as a pure-play social-networking company targeting the Latin American market, Quepasa's shares are readily available -- and investors have been bidding them through the roof.

The problem, though, is that Quepasa is no Facebook. Despite having more than 33 million users registered for its service, Quepasa reports serving only an average of six pages per month to each of them -- hardly the mark of a must-have social network. And just as AOL's (NYSE: AOL) Latin American division declared bankruptcy right after AOL spun it off, Quepasa has faced big financial troubles, posting huge losses despite its impressive revenue growth.

Revenue growth is worthless if you can never make money from it. Unless Quepasa finds a way to monetize its impressive expansion, it won't become the perfect stock.

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 Quepasa 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. A Motley Fool newsletter service has recommended OpenTable. We Fools don't 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.