Has Fluor Become the Perfect Stock?

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 Fluor (NYSE: FLR  ) 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.
• 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 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 Fluor.

Factor	What We Want to See	Actual	Pass or Fail?
Growth	5-Year Annual Revenue Growth > 15%	11.8%	Fail
�	1-Year Revenue Growth > 12%	17.3%	Pass
Margins	Gross Margin > 35%	4.7%	Fail
�	Net Margin > 15%	2.5%	Fail
Balance Sheet	Debt to Equity < 50%	14.7%	Pass
�	Current Ratio > 1.3	1.58	Pass
Opportunities	Return on Equity > 15%	20.2%	Pass
Valuation	Normalized P/E < 20	14.23	Pass
Dividends	Current Yield > 2%	1.2%	Fail
�	5-Year Dividend Growth > 10%	6.0%	Fail
�	�	�	�
�	Total Score	�	5 out of 10

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

Since we looked at Fluor last year, the company has managed to pick up three full points. Rising revenue and returns on equity along with a cheaper valuation give Fluor the score boost.

Fluor is a big player in the heavy construction industry, with its hand in infrastructure projects as well as utility and energy engineering and design. Unlike competitors Shaw Group (NYSE: SHAW  ) and Jacobs Engineering (NYSE: JEC  ) , which still get the majority of their business from U.S. sources, Fluor did a good job of capitalizing on emerging-market growth throughout much of the past decade. Demand for projects was particularly high in light of the desire of fast-growing countries to build out infrastructure quickly.

Slowing growth in emerging economies has led to investors having doubts about Fluor's future, which is a big part of why shares are down over the past year. But Fluor saw a big increase in order backlog in its most recent quarter, and the company has avoided some of the controversies that rival KBR (NYSE: KBR  ) has faced.

Another challenge Fluor has to deal with is its dependence on government contracts. With governments around the world trying to find ways to save money, austerity could hit Fluor in the bottom line.

For Fluor to keep improving, continued growth will be critical. But the shares are priced as though growth may come to a standstill, and so Fluor will need some favorable macroeconomic trends to reassert themselves in order to keep getting closer to perfection.

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.

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