LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities and today I'm looking at Meggitt (LSE:MGGT), which is an engineering group specializing in extreme environment components for the aerospace, defense and energy markets.

With the shares at 482 pence, Meggitt's market cap. is £3,791 million.

This table summarizes the firm's recent financial record:

Year to December






Revenue (£m)






Net cash from operations (£m)






Adjusted earnings per share






Dividend per share






With the recent release of yet another set of good full-year results, Meggitt continues to deliver. It's instructional to look at the segmental analyzes to get a flavor of what constitutes the firm's business. Activities in the Equipment Group, which contains a diverse range of businesses, produced 39% of operating profit, 30% came from Aircraft Breaking Systems, 13% from Control Systems, 9% from Polymers & Composites and 9% from Sensing Systems.

Geographically, Meggitt generates around 56% of revenues from the U.S., 22% from its 'rest of Europe' category, 13% from its 'rest of the world' category and 9% from the U.K. The directors expect further high single-digit growth in most categories and a flatter performance from the firm's U.S. military operations, going forward.

With such growth still on the agenda and implications for healthy on-going after-market sales, the total-return potential looks encouraging from here.

Meggitt's total-return potential

Let's examine five indicators to help judge the quality of the company's total-return potential:

1. Dividend cover: adjusted earnings covered the last dividend more than three times. 5/5

2. Borrowings: net gearing around 34% with net debt about 2.2 times earnings. 3/5

3. Growth: revenue, earnings and cash flow have all been growing steadily. 5/5

4. Price to earnings: a forward 12 looks up with growth and yield forecasts. 3/5

5. Outlook: good recent trading and a positive outlook. 5/5

Overall, I score Meggitt 21 out of 25, which encourages me to believe the firm has potential to out-pace the wider market's total return, going forward.

Foolish Summary
Meggitt scores well on the business quality indicators and looks as if it is trading at a fair price. That encourages me to believe that the firm is a good candidate for buying on share price dips. I think Meggitt is a good company and if we want to achieve superior investment returns as investors, it makes sense that we should seek out superior investment opportunities.

Keeping a keen focus on a company's ability to deliver a superior total return is one way of doing that. Indeed, step four in the Motley Fool's report "10 Steps to Making a Million in the Market" asserts that "shares beat funds" and I think that is good advice, particularly if you are targeting superior total returns. In fact, I recommend the report for any ambitious investor. To download it while it is still free, and to find out the other nine steps recommended that could transform your wealth, click here.