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 Arkansas Best (Nasdaq: ABFS) 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 Arkansas Best.

Factor What We Want to See Actual Pass or Fail?
Growth 5-Year Annual Revenue Growth > 15% (0.3%) Fail
  1-Year Revenue Growth > 12% 16.1% Pass
Margins Gross Margin > 35% 5.8% Fail
  Net Margin > 15% (1.4%) Fail
Balance Sheet Debt to Equity < 50% 14.1% Pass
  Current Ratio > 1.3 1.63 Pass
Opportunities Return on Equity > 15% (5.0%) Fail
Valuation Normalized P/E < 20 NM NM
Dividends Current Yield > 2% 0.4% Fail
  5-Year Dividend Growth > 10% (26.8%) Fail
  Total Score   3 out of 9

Source: Capital IQ, a division of Standard and Poor's. NM = not meaningful; Armour had negative earnings during the period. Total score = number of passes.

With just three points, Arkansas Best doesn't have investors keepin' on truckin'. Tough times for the freight industry have weighed on the trucking company and its peers, but the company's latest move could portend an end to the slump.

Truckers have suffered in this difficult economy. High energy prices have increased costs, making railroads Norfolk Southern (NYSE: NSC) and Union Pacific (NYSE: UNP) more attractive as transportation options. The tough environment has sparked industry infighting, with Arkansas Best suing rival YRC Worldwide (Nasdaq: YRCW) over an alleged violation of a national industry collective-bargaining agreement.

Just yesterday, Arkansas Best announced that its freight division would raise rates by almost 7%. Shareholders applauded the move, assuming that those higher rates are here to stay and will boost profitability. In addition, an appeals court said that the company's case against YRC could go forward.

It's possible that this good news is just the beginning for Arkansas Best. Other transportation stocks, including JB Hunt (Nasdaq: JBHT) and UPS (NYSE: UPS), posted reasonably good results last quarter. But with diesel costs still high and the economic recovery sputtering, it'll still be a while before Arkansas Best looks like a 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.

Click here to add Arkansas Best 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. The Motley Fool owns shares of UPS. 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.