Research In Motion Ltd (BBRY): Is This Stock Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Research In Motion Ltd (NASDAQ:BBRY) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell Research In Motion Ltd (NASDAQ:BBRY)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Research In Motion’s key statistics:

BBRY Total Return Price Chart

BBRY Total Return Price data by YCharts.

Criteria 3-Year* Change Grade
Revenue growth > 30% (26%) Fail
Improving profit margin (78.8%) Fail
Free cash flow growth > Net income growth (6.7%) vs. (126.3%) Pass
Improving EPS (128.5%) Fail
Stock growth (+ 15%) < EPS growth (78.9%) vs. (128.5%) Fail

Source: YCharts. *Period begins in Q1 2010 (February).

BBRY Return on Equity Chart

BBRY Return on Equity data by YCharts.

Criteria 3-Year* Change Grade
Improving return on equity (118.5%) Fail
Declining debt to equity No debt Pass

Source: YCharts. *Period begins in Q1 2010 (February).

How we got here and where we’re going
Research In Motion Ltd (NASDAQ:BBRY)’s shortcomings are by now well-known, but its fundamental deterioration is not as complete as many investors may think. Free cash flow has actually held up better than revenue, which is rare, and BlackBerry has long operated debt-free, which gives it a lot of flexibility to fight back against the industry leaders. The big question remains: Can BlackBerry effectively fight back? It’s earned only two passing grades this time, and will need a monster performance in 2013 to get back into positive territory.

Research In Motion Ltd (NASDAQ:BBRY)’s latest earnings report proved to be a mixed bag several days ago. Despite the earnings beat recorded for the fourth quarter, shares barely budged. The company also sold a million Z10s, many of which went to first-time buyers (who switched from other operating systems). Cash balances even held up better than expected. So why the mixed bag?