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investing for beginners

evaluating a stock

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overview

Alright alright…you know the basics. You’re staring at your screen now wondering what to invest in. Let’s talk about how to evaluate a stock.

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So you’re starting to invest for the first time, but don’t know what to invest in. You’re not alone! The best thing to do is to spend some time doing research. Let’s walk through some key things to research about a company.


The good news is that, for a public company, all this info is public! Try checking out their Yahoo! Finance pages.


Key Considerations:


Annual revenue growth and profitability 
– a good investment would likely show growth or profitability or both. The way to find this info is in the company’s income statement, where you can see their profit margin and revenue year over year.


P/E ratio (price to earnings ratio)
 – a measure of how much the current price reflects earnings success vs speculation. A low P/E ratio indicates that a company’s stock price is not huge relative to its earnings. A high P/E ratio indicates that a company is trading at a large multiple of its earnings, indicating that the market may have too lofty a valuation on a particular company.


Yield (or Dividend Rate)
 – a very important for a value investing strategy. This is money paid to you out of the profits the company is making. The higher the yield, the more dividend income you’ll receive when profits are distributed.


Industry benchmarks – 
look at competitors’ revenue growth and relative standing! Is the company that you’re researching doing well relative to its competitors. If not, maybe check out the competitor as a potential investment.


Timing 
– look at the multi year chart. Is this stock at a high, is it at a low? If it’s at a low point, it might be a good buy…but maybe it’s at a low point for a good reason. Worth checking out!


Company news 
– is there anything big happening with the company? Google them to find out.


Company leadership 
– is it sound? Were a bunch of executives fired recently? This can be an interesting signal about how a company is performing.


The company’s investor relations section 
– every public company has an investor relations section on their site that you should check out. Sometimes we like to go through a company’s investor materials to make judgments about future performance.


Company values 
– make sure it’s an investment that you’re proud to make. If you’re putting your money into a company, check to make sure their values align with yours.

 

Check out the next lesson for more info on stock brokerages!

 

Source(s): Yahoo! Finance

No account yet? Register

investing for beginners

evaluating a stock

Alright alright…you know the basics. You’re staring at your screen now wondering what to invest in. Let’s talk about how to evaluate a stock.

So you’re starting to invest for the first time, but don’t know what to invest in. You’re not alone! The best thing to do is to spend some time doing research. Let’s walk through some key things to research about a company.


The good news is that, for a public company, all this info is public! Try checking out their Yahoo! Finance pages.


Key Considerations:


Annual revenue growth and profitability 
– a good investment would likely show growth or profitability or both. The way to find this info is in the company’s income statement, where you can see their profit margin and revenue year over year.


P/E ratio (price to earnings ratio)
 – a measure of how much the current price reflects earnings success vs speculation. A low P/E ratio indicates that a company’s stock price is not huge relative to its earnings. A high P/E ratio indicates that a company is trading at a large multiple of its earnings, indicating that the market may have too lofty a valuation on a particular company.


Yield (or Dividend Rate)
 – a very important for a value investing strategy. This is money paid to you out of the profits the company is making. The higher the yield, the more dividend income you’ll receive when profits are distributed.


Industry benchmarks – 
look at competitors’ revenue growth and relative standing! Is the company that you’re researching doing well relative to its competitors. If not, maybe check out the competitor as a potential investment.


Timing 
– look at the multi year chart. Is this stock at a high, is it at a low? If it’s at a low point, it might be a good buy…but maybe it’s at a low point for a good reason. Worth checking out!


Company news 
– is there anything big happening with the company? Google them to find out.


Company leadership 
– is it sound? Were a bunch of executives fired recently? This can be an interesting signal about how a company is performing.


The company’s investor relations section 
– every public company has an investor relations section on their site that you should check out. Sometimes we like to go through a company’s investor materials to make judgments about future performance.


Company values 
– make sure it’s an investment that you’re proud to make. If you’re putting your money into a company, check to make sure their values align with yours.

 

Check out the next lesson for more info on stock brokerages!

 

Source(s): Yahoo! Finance

lessons in this course

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