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 VirnetX Holding Corporation (NYSEAMEX:VHC) 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, and with the understanding that these factors don't always work well with companies that don't have traditional business models, let's take a closer look at VirnetX.
|Factor||What We Want to See||Actual||Pass or Fail?|
|Growth||5-year annual revenue growth > 15%||54%||Pass|
|1-year revenue growth > 12%||1,343%||Pass|
|Margins||Gross margin > 35%||100%||Pass|
|Net margin > 15%||NM||NM|
|Balance sheet||Debt to equity < 50%||0%||Pass|
|Current ratio > 1.3||10.60||Pass|
|Opportunities||Return on equity > 15%||(40.4%)||Fail|
|Valuation||Normalized P/E < 20||NM||NM|
|Dividends||Current yield > 2%||0%||Fail|
|5-year dividend growth > 10%||0%||Fail|
|Total score||5 out of 8|
Since we looked at VirnetX last year, the company has seen its score climb substantially, largely because of high percentage gains in revenue. Investors have also been optimistic about its prospects, as the stock has risen 50% over the past year.