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 JetBlue (Nasdaq: JBLU) 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 JetBlue.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 16.6% Pass
  1-Year Revenue Growth > 12% 16.3% Pass
Margins Gross Margin > 35% 32.2% Fail
  Net Margin > 15% 2.6% Fail
Balance Sheet Debt to Equity < 50% 183.5% Fail
  Current Ratio > 1.3 1.22 Fail
Opportunities Return on Equity > 15% 6.3% Fail
Valuation Normalized P/E < 20 16.79 Pass
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
       
  Total Score   3 out of 10

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

With only three points, JetBlue isn't flying high. The airline industry has had tough times lately, and although most of the airlines have become profitable, few have any confidence that the good times will last.

When it was founded in 1998, JetBlue was seen as a primary competitor to Southwest Airlines (NYSE: LUV) and its uniquely successful business model in an industry well-known for big losses. Yet ever since a PR fiasco in 2007, in which JetBlue left flyers in planes for as long as 10 hours during a bad winter storm, the company has never completely gotten its mojo back. Still, with major carriers Delta (NYSE: DAL), US Airways (NYSE: LCC), and both halves of United Continental (NYSE: UAL) having filed for bankruptcy at various stages of their corporate lives, JetBlue is remarkable simply for having avoided that fate.

Lately, airlines have responded to rising costs by implementing various fees for everything from baggage to fuel surcharges. That has helped JetBlue stay profitable, but it also risks incurring the wrath of fee-weary passengers.

It's entirely possible that no airline can truly be a perfect stock. JetBlue has fared better than many, but unless trends like consolidation and smarter route selection become more prevalent throughout the industry, even the more promising airlines like JetBlue will have trouble posting the kind of financial results that most investors prefer to see.

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.

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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 Southwest Airlines. 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.