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 GameStop Corp. (NYSE:GME) 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:
With those factors in mind, let's take a closer look at GameStop.
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-year annual revenue growth > 15%||6.4%||Fail|
|1-year revenue growth > 12%||(7.9%)||Fail|
|Margins||Gross margin > 35%||29.4%||Fail|
|Net margin > 15%||(4%)||Fail|
|Balance sheet||Debt to equity < 50%||0%||Pass|
|Current ratio > 1.3||1.07||Fail|
|Opportunities||Return on equity > 15%||(14.1%)||Fail|
|Valuation||Normalized P/E < 20||8.72||Pass|
|Dividends||Current yield > 2%||4%||Pass|
|5-year dividend growth > 10%||NM||NM|
|Total score||3 out of 9|
Since we looked at GameStop last year, the company has kept its three-point score for the third year in a row, with revenue growth slowing but the game retailer starting to pay a dividend. The stock has been volatile but has managed to climb by about 10% over the past year.