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 Cerus (Nasdaq: CERS) 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 a 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 Cerus:

Factor What We Want to See Actual Pass or Fail?
Growth 5-Year Annual Revenue Growth > 15% (0.8%) Fail
  1-Year Revenue Growth > 12% 18.7% Pass
Margins Gross Margin > 35% 48.6% Pass
  Net Margin > 15% (69.3%) Fail
Balance Sheet Debt to Equity < 50% 23.4% Pass
  Current Ratio > 1.3 1.77 Pass
Opportunities Return on Equity > 15% (92.2%) Fail
Valuation Normalized P/E < 20 NM NM
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
       
  Total Score   4 out of 9

Source: Capital IQ, a division of Standard and Poor's. NM = not meaningful due to negative earnings for the period. Total score = number of passes.

With just four points, Cerus is well short of perfection. Like many of its peers, the small biotech firm is hoping to hit a home run, but shareholders have been waiting a long time without much success.

Founded 20 years ago, Cerus's primary product is its INTERCEPT blood system. Basically, the system promotes blood safety by preventing blood-borne pathogens from spreading while still allowing ordinary blood cells and platelets to function normally. With a private equity firm snapping up blood-testing equipment maker Immucor (Nasdaq: BLUD) in a $2 billion deal, investors with interest in the business may turn their eyes to Cerus.

Unfortunately, the only time Cerus has turned a profit in its 20-year history was when it settled a loan obligation with Baxter International (NYSE: BAX). The problem stems from its failure to get approval to sell its systems in the U.S. market; despite having approval in the European Union, U.S. sales would give the company a big boost.

The company is taking steps to get INTERCEPT through the FDA approval process, seeking new applications for patients with chronic fatigue syndrome as well as potential treatments for cancer. But just as Cell Therapeutics (Nasdaq: CTIC) recently saddled shareholders with a dilutive offering to raise cash, Cerus's consistent losses will probably force it to do the same thing to investors sooner or later.

Cerus doesn't look like the perfect stock right now. Unless it can transform interest from the Immucor deal into a buyout proposition, shareholders will have to hope for positive news from the FDA in the near future.

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.

Click here to add Cerus to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our 13 Steps to Investing Foolishly.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. 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 Fool has a disclosure policy.