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 AutoNavi (NASDAQ: AMAP) 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 AutoNavi.


What We Want to See


Pass or Fail?


5-Year Annual Revenue Growth > 15%




1-Year Revenue Growth > 12%




Gross Margin > 35%




Net Margin > 15%



Balance Sheet

Debt to Equity < 50%




Current Ratio > 1.3




Return on Equity > 15%




Normalized P/E < 20




Current Yield > 2%




5-Year Dividend Growth > 10%




Total Score


6 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at AutoNavi last year, the company has dropped two points, with declining return on equity and a rising earnings multiple. The stock has managed to post a small gain of about 10% over the past year.

AutoNavi is best known for its map database in China. The company has built many strategic partnerships among Internet-based companies doing business within the emerging nation, listing Renren (NYSE:RENN) and SINA (NASDAQ:SINA) as representative customers for its map-based technology.

Recently, AutoNavi found itself peripherally involved in the war between smartphone giants Apple (NASDAQ:AAPL) and Google (NASDAQ: GOOG). When Apple decided to stop providing Google mapping services and went with its own software, it received huge criticism for inaccuracies in its map database. But because Apple stuck with AutoNavi's software in China, Chinese users of iPhone 5 maps haven't had anything to complain about. That's a clear vote of confidence for the company going forward.

Yet AutoNavi is working hard to cement its place within the industry. It has a newly expanded agreement with DigitalGlobe (NYSE:DGI) that should give both companies a leg up in gaining global reach for their products, and as technology becomes more advanced, applications for both personal and business use should support AutoNavi further.

AutoNavi likely won't improve until it has built itself up enough to consider paying a dividend. Focusing on earnings growth, however, could help it reduce its multiple and get it moving in the right direction toward 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.

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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.