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 Comcast (Nasdaq: CMCSA) 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 Comcast.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 12.7% Fail
  1-Year Revenue Growth > 12% 13.2% Pass
Margins Gross Margin > 35% 57.8% Pass
  Net Margin > 15% 9.1% Fail
Balance Sheet Debt to Equity < 50% 65.4% Fail
  Current Ratio > 1.3 0.55 Fail
Opportunities Return on Equity > 15% 7.3% Fail
Valuation Normalized P/E < 20 16.88 Pass
Dividends Current Yield > 2% 1.9% Fail
  5-Year Dividend Growth > 10% 21.5%* Pass
  Total Score   4 out of 10

Source: Capital IQ, a division of Standard and Poor's. *Dividend growth rate since Comcast started paying a dividend in 2008. Total score = number of passes.

With four points, Comcast isn't connecting perfectly with shareholders. The cable company has its hand in a number of businesses, but it has failed to impress customers.

Like fellow cable company Time Warner Cable (NYSE: TWC), Comcast offers bundles of services for consumers and business users, including cable TV, broadband Internet access, and phone service. But Comcast has seen video subscriber counts fall by 39,000 during the first quarter, raising questions about its future viability.

In addition, the company has made some unpopular moves in its more promising broadband business. Fellow Fool Tim Beyers noted that Comcast plans to keep imposing data caps on its highest-end hyperfast connection plans. Although AT&T (NYSE: T) has held off on implementing 4G and Verizon (NYSE: VZ) said it would forcibly slow down connections for high-data users, Comcast's data limits render top-speed Internet far less useful.

The big wildcard for Comcast is NBCUniversal, which it recently took control of from General Electric. The deal gives Comcast a theme park business to rival Disney's (NYSE: DIS), but it's much more important as a possible source of content going forward.

Comcast has a terrible reputation among consumers, ranking among the worst four companies in this year's Consumerist poll. If the company can execute on its recent acquisition and fix missteps in its core cable and Internet business, Comcast might get a lot closer to perfection.

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 Comcast 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. Motley Fool newsletter services have recommended buying shares of Walt Disney and AT&T. 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.