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 Becton Dickinson (NYSE: BDX) 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 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 Becton Dickinson.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 6% Fail
  1-Year Revenue Growth > 12% 3.6% Fail
Margins Gross Margin > 35% 52.2% Pass
  Net Margin > 15% 17.8% Pass
Balance Sheet Debt to Equity < 50% 53.5% Fail
  Current Ratio > 1.3 3.08 Pass
Opportunities Return on Equity > 15% 23.7% Pass
Valuation Normalized P/E < 20 19.10 Pass
Dividends Current Yield > 2% 1.9% Fail
  5-Year Dividend Growth > 10% 14.6% Pass
  Total Score   6 out of 10

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

With six points, Becton Dickinson looks pretty healthy. The company has seen somewhat anemic growth in recent years, but a fast-growing dividend along with good return on equity have given investors a lot to smile about.

Becton makes a variety of medical supplies, including needles, syringes, and catheters. It has a diagnostic segment that competes against companies like Quest Diagnostics (NYSE: DGX) and Laboratory Corp (NYSE: LH) to some extent, but with its basic core products, it runs up against Baxter International (NYSE: BAX) and Covidien (NYSE: COV).

Looking at its competitors, Becton doesn't particularly stand out. Baxter, Covidien, and Becton all trade at similar multiples and have seen the same slow growth trends. Larger competitor Abbott Labs (NYSE: ABT) has seen faster growth, but its business has a wider scope that gives it some opportunities that Becton and most of its peers lack.

One strong point in Becton's favor lately has been its strong presence in international markets. With 57% of Becton's revenue coming from outside the U.S., the health of the global economy is critical to its success. Fortunately, the company has done well internationally, reporting 30% growth in China in its most recent quarter. The one downside is that its international sales leave Becton vulnerable to currency fluctuations -- but lately, that's also worked in its favor.

Without stronger growth, Becton won't achieve perfect status. Nevertheless, for those looking for exposure to the health-care industry beyond drugmakers, Becton is worth a closer look.

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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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. The Motley Fool owns shares of Abbott Labs. Motley Fool newsletter services have recommended buying shares of Abbott Labs, Covidien, Quest Diagnostics, Laboratory Corp, and Becton. 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.