As the world's third-richest person and most celebrated investor, Warren Buffett attracts a lot of attention. Thousands try to glean what they can from his thinking processes and track his investments.

We can't know for sure whether Buffett is about to buy U.S. Steel (NYSE: X) -- he hasn't specifically mentioned anything about it to me -- but we can discover whether it's the sort of stock that might interest him. Answering that question could also reveal whether it's a stock that should interest us.

In his most recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power
  2. Good returns on equity with limited or no debt
  3. Management in place
  4. Simple, non-techno-mumbo-jumbo businesses

Does U.S. Steel meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine U.S. Steel's earnings and free cash flow history:

Xfeb

Source: S&P Capital IQ.

U.S. Steel's earnings have been quite volatile over the past several years. As for much of the steel industry, revenue took a big hit in 2009, and earnings have yet to fully recover.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt-to-equity ratio, because that will skew your calculations and make the company look much more efficient than it is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.

Company

Debt-to-Equity Ratio

Return on Equity

5-Year Average Return on Equity

U.S. Steel 121% (2%) 3%
Nucor 56% 11% 15%
Steel Dynamics 100% 12% 15%
AK Steel 239% (31%) 1%

Source: S&P Capital IQ.

Returns on equity have been subdued in much of the struggling steel industry, but some -- Nucor and Steel Dynamics -- have rebounded more strongly than others -- U.S. Steel and AK Steel, though it should be noted that while U.S. Steel hasn't totally returned to profitability, returns are nowhere near as bad as they were in, say, 2009.

3. Management
CEO John Surma was been at the job since 2004. Before that, he was the company's CFO and COO.

4. Business
Steel production isn't particularly susceptible to rapid technological disruption, though it's worth noting that disruption can occur (and has occurred) in the industry over longer time frames, as mini-mills like Nucor have been slowly disrupting integrated steelmakers like U.S. Steel over decades.

The Foolish conclusion
So is U.S. Steel a Buffett stock? Probably not. Although the company does have tenured management and operates in a technologically straightforward industry, it doesn't particularly exhibit the other characteristics of a quintessential Buffett investment: consistent earnings and high returns on equity with limited debt. 

However, if you're interested in a stock that our top analysts and chief investment officer picked to beat the market, you can check out The Motley Fool's Top Stock for 2012. I invite you to download this special report for a limited time by clicking here -- it's free.

Ilan Moscovitz doesn't own shares of any company mentioned. Motley Fool newsletter services have recommended buying shares of Nucor. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.