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 things for sure: Youll never discover truly great investments unless you actively look for them. Lets discuss the ideal qualities of a perfect stock, then decide if Enterprise Products Partners (NYSE: EPD) 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, its certainly a better sign than a stagnant top line.
- Margins. Higher sales mean nothing if a company cant 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 managements attention. Companies with strong balance sheets dont 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 cant afford to pay too much for even the best companies. By using normalized figures, you can see how a stocks simple earnings multiple fits into a longer-term context.
- Dividends. For tangible proof of profits, a check to shareholders every three months cant be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.
With those factors in mind, lets take a closer look at Enterprise Products Partners.