Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Symantec (NASDAQ:SYMC) fit the bill? Let's look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell Symantec's story, and we'll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's look at Symantec's key statistics:

SYMC Total Return Price data by YCharts

Passing Criteria

3-Year* Change

Grade

Revenue growth > 30%

14.9%

Fail

Improving profit margin

(11.2%)

Fail

Free cash flow growth > Net income growth

(13%) vs. 2.1%

Fail

Improving EPS

16.2%

Pass

Stock growth (+ 15%) < EPS growth

52.8% vs. 16.2%

Fail

Source: YCharts.
*Period begins at end of Q3 2010.

SYMC Return on Equity (TTM) data by YCharts

Passing Criteria

3-Year* Change

Grade

Improving return on equity

(15.5%)

Fail

Declining debt to equity

(34.3%)

Pass

Dividend growth > 25%

Initiated in 2013

Pass

Free cash flow payout ratio < 50%

16.3%

Pass

Source: YCharts.
*Period begins at end of Q3 2010.

How we got here and where we're going
We first looked at Symantec last year, and it has now earned five out of nine possible passing grades because it's recently started paying quarterly dividends -- but compared to last year's pre-dividend analysis, the company has actually lost one of its initial passing grades (from four out of seven). Symantec's free cash flow continues to decline, and the company's margins now appear to be shrinking as well. Will new Symantec CEO Steve Bennett be able to push the antivirus maker forward, or is the company's recent stock surge unsustainable? Let's dig deeper to find out what might lie in store.

Symantec's latest quarter showed a disappointing 4% decline in revenue, which was largely driven by a drop in international sales, especially in the piracy-prone Asia-Pacific region, and in Japan. However, the company continues to report positive EPS, though it is no longer relying on the tax-based boost that propped up its bottom line last year. At the start of the year, CEO Steve Bennett announced more than 1,000 layoffs to push operating profit margins up, but this has not yet shown up significantly, as the company's margins are lower now than they were three years ago. Symantec's also lowered its earnings guidance for the full year amid weakening PC market around the world. The company now expects revenue to fall between $1.63 billion and $1.67 billion during the upcoming quarter.

Fool contributor Ryan Sullivan notes that the security software providers are trying to capitalize on the booming mobile security space as Google's (NASDAQ:GOOGL) Android platform has become more susceptible to malware. Kaspersky Labs reported that it discovered 29,695 new malware programs in the second quarter of 2013, a 23% from just one quarter earlier. This offers a chance for both Symantec and rival AVG Technologies (NYSE:AVG) to grow their subscriber base with mobile security solutions. Earlier this month, AVG 's free AntiVirus Security jumped into the 100 to 500 million downloads range on Google Play, outpacing Symantec's Norton Mobile Security. However, Google's Android Security Chief does point out that less than 0.001% of apps on the Android store can cause harm.

According to IDC, global PC shipments fell 7% in the third quarter, a decline that's expected to continue through next year. Fool contributor Sean Williams notes that Symantec's traditionally depended on OEM partnerships, which preinstall the software on PCs, while AVG utilizes online advertising to drive trial and subscription revenue. That points toward better opportunities for AVG in the future, as a product specifically sought out will tend to be paid for (and used) at higher rates than one that comes with your computer.

Putting the pieces together
Today, Symantec has some of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.