How to research a stock
2 mins | Beginnner
Summary
We totally get it - research can be a boring thing! But when it comes to investing, sadly it's vital to making the right decisions.
If you’re wondering where to even start researching or what to look for, here is a list of things we’ve put together that will help you choose the right stock for you!
1. Collect Company research materials
Review the company's financials. Highlights from financial filings and important financial ratios, these can be found on the companies website or financial news websites. Just start with a simple google search.
2. Get specific
Focus on the following numbers & ratios:
Revenue: the ‘top line’ amount of money a company brought in during the specified period.
Net income: the “bottom line” total amount of money a company has made after operating expenses, taxes & depreciation are subtracted from revenue.
Earnings per share (EPS): earnings divided by the number of shares available to trade. It shows the per-share profitability of a company.
Price-earnings ratio (P/E): a measure of a stock’s value that tells you how much investors are willing to pay to receive $1 of the company’s current earnings.
Return on equity (ROE): reveals how much profit a company generates with each dollar shareholders have invested.
3. Do some investigative research
Here are some questions you should try and find answers to:
How does the company make money?
Does the company have a competitive advantage?
Does there seem to be effective management?
What could go wrong for this industry/company?
Investing involves risk. You aren't guaranteed to make money, and you might lose the money you start with.
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