An individual invests in a stock in order to earn profit. It is very disheartening when you invest your hard-earned money in a stock which doesn’t give you desired returns. It is really important to do all the research before you choose to invest in a particular stock.
Here are a few things to check before you choose to invest in a stock.
Read about the company that you want to invest in. Find out what their business is. Visit their website, read news articles related to the company.
Financial performance of Company
It is important to analyse the past performance to understand how the company has grown over the years. Read the balance sheets to see how their balance sheets have grown in the past.
There are ways to find out whether a stock is over or undervalued. Some basic methods would include Price to Earning ratio (P/E ratio), Price to Sales Ratio that helps one understand if the market value of the stock is in line with the growth trends of the company.
Read about the competitors and peers of the company. Finds out what competitive edge your company has over the others. Find out if the advantage is sustainable. Find out about the market share, and overall performance of the industry that they operate in. Look for regulatory, political factors that may impact the industry.
Always read about the people who are running the company. Find out their background and how long they have spent with the company. Frequent changes in the top management, inexperienced top managers may be poor indicators while picking the right stock.