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 Ebix, Inc. (NASDAQ:EBIX) fit the bill? Let's take a 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 Ebix'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 take a look at Ebix's key statistics:

EBIX Total Return Price Chart

EBIX Total Return Price data. Source: YCharts.

Passing Criteria

3-Year* Change

Grade

Revenue growth > 30%

54.9%

Pass

Improving profit margin

(35.1%)

Fail

Free cash flow growth > Net income growth

11.6% vs.0.4%

Pass

Improving EPS

0.7%

Pass

Stock growth (+ 15%) < EPS growth

(33.2%) vs. 0.7%

Pass

Source: YCharts. * Period begins at end of Q4 2010.

EBIX Return on Equity (TTM) Chart

EBIX Return on Equity (TTM) data. Source: YCharts.

Passing Criteria

3-Year* Change

Grade

Improving return on equity

(48.2%)

Fail

Declining debt to equity

(10.5%)

Pass

Dividend growth > 25%

87.5%

Pass

Free cash flow payout ratio < 50%

5%

Pass

Source: YCharts. * Period begins at end of Q4 2010.

How we got here and where we're going
Ebix's score has not changed since we examined it last year, as the insurance software specialist once again puts together a strong showing with seven out of nine possible passing grades. The same two metrics -- profit margins and return on equity -- have kept Ebix from picking up a perfect score the second time around, and the market has punished this weakness with another year of share-price declines. All of Ebix's growth rates look weaker this year than they did in 2013, which could indicate further turbulence in the year ahead. Will Ebix be able return to stronger growth and achieve a perfect score in 2015, particularly after its recent troubles? Let's dig a little deeper to find out?

Ebix came in ahead of Wall Street's estimates in its fourth quarter and beat estimates again in its first quarter, despite recording several quarters of declining year-over-year earnings. The company's top line has been hampered in particular by declining revenues from PlanetSoft, which Ebix acquired in 2012. Fellow Fool Dan Caplinger highlights Ebix's track record of troublesome issues from last year, which included federal investigations and shareholder class action lawsuits and which allowed short sellers to pounce on Ebix's shares.

The largest issue in Ebix's rearview mirror is, of course, last year's tanked buyout attempt at $20 per share, which fell apart after the U.S Attorney for the Northern District of Georgia opened an investigation into purported intentional misconduct, cutting the company's share price in half. Ebix defended itself with an aggressive $100 million share-repurchase program, but its effect has been muted thus far. Alleged federal tax evasion probes, followed by Microsoft's lawsuit over copyright infringement, have also kept Ebix from rising. Earlier this year, Ebix agreed to pay out $6.5 million over a class action lawsuit filed by shareholders, which should help deflect additional litigation in the near term.

However, Ebix continues to take solid steps to move past its lost buyout opportunity as the company inked a deal to integrate its A.D.A.M. Health Content Exchange service with Telefonica/Vivo's (a.k.a. Telefonica Brasil's) (NYSE:VIV) eHealth Self Care services in Brazil. Intel (NASDAQ:INTC) has also teamed up with Ebix to launch the A.D.A.M. Health Content Exchange, which will offer medical training programs designed exclusively for Intel-powered Ultrabooks. Going forward, Ebix CEO Robin Raina also plans to acquire related businesses with strong recurring revenues, which will help strengthen and diversify its business framework.

Putting the pieces together
Today, Ebix has many 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.

Alex Planes owns shares of Intel. The Motley Fool recommends and owns shares of Intel. It owns shares of Microsoft. 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.