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 Monster Worldwide (NYSE: MWW) 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 Monster Worldwide.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 1.1% Fail
  1-Year Revenue Growth > 12% 18.3% Pass
Margins Gross Margin > 35% 49.4% Pass
  Net Margin > 15% 0.6% Fail
Balance Sheet Debt to Equity < 50% 10.3% Pass
  Current Ratio > 1.3 0.67 Fail
Opportunities Return on Equity > 15% 0.5% Fail
Valuation Normalized P/E < 20 73.28 Fail
Dividends Current Yield > 2% 0.0% Fail
  5-Year Dividend Growth > 10% 0.0% Fail
  Total Score   3 out of 10

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

Monster Worldwide can hire only 3 points for its score. The company saw its meteoric growth stall out during the economic recession, but now that a slow recovery is taking hold, Monster is showing some signs of progress.

After a recession that raised unemployment toward the 10% mark, the last thing Monster needed was a jobless recovery. Yet that's what it got, and even after its own gauge of online demand started rising last year, Monster was still posting losses. Without the specialized listings of Dice Holdings (NYSE: DHX) or the red-hot Chinese market that 51job (Nasdaq: JOBS) rules over, Monster finds itself in the unusual position of being staid and lacking in recent innovation.

Another potential problem comes from social media. Just as Monster changed the paradigm for recruiters Kelly Services (Nasdaq: KELYA) and Robert Half International (NYSE: RHI), so, too, is LinkedIn (NYSE: LNKD) disrupting Monster's domination of the Internet for hiring purposes.

Investors are clearly impatient for a faster recovery. Yesterday, the stock opened on about a 10% dip earlier this week after Monster CEO Sal Iannuzzi refused to raise guidance for the year, despite posting estimate-beating results for sales and earnings during the quarter.

Eventually, Monster may regain a bit more of its lost luster. But with innovation continuing unchecked throughout the industry, Monster won't become a perfect stock unless it can start matching up to new players.

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.