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, then decide if TJX (NYSE: TJX) 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. 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 mean nothing if a company can't produce profits from them. Strong margins ensure that 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.
  • Money-making 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 TJX.

Factor What We Want to See Actual Pass or Fail?
Growth 5-year annual revenue growth > 15% 6.6% Fail
  1-year revenue growth > 12% 8.2% Fail
Margins Gross margin > 35% 26.9% Fail
  Net margin > 15% 6.1% Fail
Balance sheet Debt to equity < 50% 25.5% Pass
  Current ratio > 1.3 1.63 Pass
Opportunities Return on equity > 15% 44.7% Pass
Valuation Normalized P/E < 20 15.62 Pass
Dividends Current yield > 2% 1.4% Fail
  5-year dividend growth > 10% 20.1% Pass
  Total Score   5 out of 10

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

TJX looks like a typical stock with a score of five. But the retailer has played to its strength during the recession and ensuing recovery, combining just the right elements of luxury and thriftiness to appeal to cash-starved shoppers looking for great deals.

TJX operates in the crowded world of "off-price retailers" -- stores that offer goods that they buy mostly from higher-end stores trying to get rid of excess inventory. From bricks-and-mortar outfits Big Lots (NYSE: BIG) and DSW (NYSE: DSW) to online discounter Overstock.com (Nasdaq: OSTK), TJX has plenty of competition. But TJX leads the way with 2,800 stores, including its T.J. Maxx and Marshalls namesakes.

For the most part TJX outpaces its competitors with a sky-high return on equity without excessive debt, and also has impressive margins for the normally razor-thin-margin world of retail. Ross Stores (Nasdaq: ROST) gives TJX a run for its money, but with a slightly cheaper valuation and a small edge in dividend yield, TJX comes out ahead.

Retail is a tough business, but TJX has been able to capitalize on cheap rents to establish stores in hot areas such as Manhattan. With fashion designers having more inventory than they know what to do with, TJX has been able to improve its offerings as well. Those favorable conditions won't last forever, but as long as they do, they make a winning combination for the retailer.

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 TJX 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. 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.