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 and then decide whether Statoil 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.
  • Moneymaking 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 Statoil.

Factor

What We Want to See

Actual

Pass or Fail?

Growth

5-year annual revenue growth > 15%

6.8%

Fail

 

1-year revenue growth > 12%

12.1%

Pass

Margins

Gross margin > 35%

41%

Pass

 

Net margin > 15%

9.5%

Fail

Balance sheet

Debt to equity < 50%

37.3%

Pass

 

Current ratio > 1.3

1.32

Pass

Opportunities

Return on equity > 15%

23%

Pass

Valuation

Normalized P/E < 20

3.61

Pass

Dividends

Current yield > 2%

4.5%

Pass

 

5-year dividend growth > 10%

(6%)

Fail

       
 

Total score

 

7 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Statoil last year, the company has held onto both of the points it gained from 2011 to 2012. But the stock has only managed a flat performance over the past year, as the energy industry has seen a break in its stellar growth of years past.

Statoil has faced some challenges recently. Its most recent quarterly report shows a strong example of its challenges, as lower oil and gas prices cut its fourth-quarter earnings in half and sent revenue down 8% despite higher natural gas volumes.

But Statoil is looking for growth opportunities around the world. In Russia, it teamed up with Rosneft to take a one-third stake in four offshore areas and with Gazprom on a project in the Barents Sea. Statoil has also made big bets on the U.S. Bakken shale play, having bought Brigham Exploration in late 2011, although speculation that it might be looking to add Whiting Petroleum to its arsenal proved to be incorrect.

One very recent concern that has arisen comes from so-called "unburnable" reserves, stemming from a recent HSBC analysis of the impact of enforcing a dramatic reduction in carbon emissions to avoid irreversible climate change. According to HSBC, Statoil would be the hardest hit by measures to hold emissions within the two-degree scenario, with 17% of its market cap at risk compared to just 5% to 6% for Total and BP .

For Statoil to improve, it needs to continue ramping up revenue and seek ways to restore former dividend growth. Growth initiatives around the world should be able to help Statoil, and if they succeed, then they could push the company closer to perfection in the years ahead.

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.

Even with oil and gas prices down, the long-term picture for energy remains promising. Find out which incredible natural gas company we've picked as a rare "double-play" investment opportunity by reading our new report, "The One Energy Stock You Must Own Before 2014." You can get your copy today, totally free. Click here to read more.

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

The article Has Statoil Become the Perfect Stock? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Statoil and Total. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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