Everyone would love to find the perfect stock. But will you ever really find a stock that gives you everything you could possibly want?

One thing's for sure: If you don't look, you'll never find truly great investments. So let's first take a look at what you'd want to see from a perfect stock, and then decide if Potash Corp. of Saskatchewan (NYSE: POT) fits the bill.

The quest for perfection
When you're looking for great stocks, you have to do your due diligence. It's not enough to rely on a single measure, because a stock that looks great based on one factor may turn out to be horrible in other ways. The best stocks, however, excel in many different areas, which all come together to make up a very attractive picture.

Some of the most basic yet important things to look for in a stock are:

  • 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 don't mean anything if a company can't turn them into profits. Strong margins ensure a company is able to turn revenue into profit.
  • Balance sheet. Debt-laden companies have banks and bondholders competing with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Companies need to be able to turn their resources into profitable business opportunities. Return on equity helps measure how well a company is finding those opportunities.
  • Valuation. You can't afford to pay too much for even the best companies. Earnings multiples are simple, but using normalized figures gives you a sense of how valuation fits into a longer-term context.
  • Dividends. Investors are demanding tangible proof of profits, and there's nothing more tangible than getting a check every three months. 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 PotashCorp.

Factor What We Want to See Actual Pass or Fail?
Growth 5-Year Annual Revenue Growth > 15% 9.5% fail
  1-Year Revenue Growth > 12% 20.7% pass
Margins Gross Margin > 35% 40.9% pass
  Net Margin > 15% 29.3% pass
Balance Sheet Debt to Equity < 50% 47.3% pass
  Current Ratio > 1.3 0.90 fail
Opportunities Return on Equity > 15% 22.9% pass
Valuation Normalized P/E < 20 32.29 fail
Dividends Current Yield > 2% 0.3% fail
  5-Year Dividend Growth > 10% 14.9% pass
  Total Score   6 out of 10

Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.

PotashCorp comes in with a score of 6. For a company that's gone from boom to bust and back again, PotashCorp has certainly seen plenty of excitement.

As you'd guess from its name, PotashCorp produces potash, a potassium-rich salt that is commonly used in fertilizer.

The company has a long history of solid stock performance, having tripled in price between 2000 and 2005. But like fellow fertilizer companies Intrepid Potash (NYSE: IPI), Mosaic (NYSE: MOS), and Agrium (NYSE: AGU), PotashCorp really came onto the scene during the commodity boom of 2007 and 2008, when high prices for farm goods put crop-enhancing fertilizers at a premium. When the boom ended in late 2008, those stocks all came crashing down.

More recently, though, the company has come into play. BHP Billiton (NYSE: BHP) made a bid for the fertilizer giant, but just yesterday, the Canadian government blocked a potential takeover, arguing that the deal wouldn't benefit the nation. The decision gives BHP 30 days to amend its offer, but many are skeptical that a successful bid will be possible.

That may push the stock down in the short run, but long-term shareholders should be happy to hang onto their shares. High valuations are one of the only downsides the company has, and with commodities back on the rise, PotashCorp stands to make more money whether it stays independent or becomes part of a larger acquirer. That's pretty much a perfect situation for investors.

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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Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. Try any of our Foolish newsletters today, 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 Fool has a disclosure policy.