Is Molson Coors the Perfect Stock?

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 Molson Coors (NYSE: TAP) 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 Molson Coors.

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

With six points, Molson Coors brews up a pretty good showing. The beer maker has faced both fierce competition and higher costs, but so far, the company has managed to meet those challenges head-on.

Many have talked about how the rising prices of food commodities have crimped margins at many companies. From Sara Lee (NYSE: SLE) to beverage and snack giant PepsiCo (NYSE: PEP), it's harder to sustain profit growth when your costs are rising. But barley prices have jumped at an even faster pace than wheat and corn, and that's been bad news for Boston Beer (NYSE: SAM) and other brewers.

Molson, however, has managed to buck that trend, keeping its net margins much wider than Boston Beer, Anheuser-Busch InBev (NYSE: BUD), or specialty brewer Craft Brewers Alliance. That has helped the company keep its policy of raising dividends regularly and sharply, which it has managed despite the complications of the Molson-Coors merger back in 2005.

The best news for Molson Coors lately was the end of the NFL lockout, which brought football back for the 2011 season. As fellow Fool Sean Williams pointed out, a host of restaurant chains like Buffalo Wild Wings (Nasdaq: BWLD) and other beverage makers will undoubtedly benefit from the billions in business that depend on the sport for their success.

Molson needs to see better growth in order to reach perfection. But with business fundamentals solidly in place, the company has what it takes to earn some more points 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.

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