Is the Company Successful?
If a company is turning a profit, that’s a success. However, you want to know how successful they are. If they are on the stock market then they are required to provide the amount of profits they are earning each quarter. This lets you know how successful they are.
What Is the Earning History?
You want a company that has shown the ability to continually earn profits over a large period of time, preferably decades, but a few years can be good enough. Also, those profits should be on the rise and should not see dramatic losses in any quarter.
What Is the Stocks Value in the Market?
It is always good to check to see how well the company is doing on the stock market. You should see a continual rise in its value, maybe even regardless of how the market in general is doing. Look for indicators of where there was growth, and see if there are any of those potential indicators in the future.
Who Are the Competitors?
A big thing to pay attention to are the competitors to that company. If they have a major share of the market and that looks like it will continue, then you have no worries. However, if there is even one competitor that looks like they could grab a major market share in the near future, you may be wise to temper your enthusiasm for that stock.
Who Owns the Company?
If the company is selling shares on the market, then you can know about its owners. This is a good thing to know, as a stock may look quite viable but may have a loose cannon for an owner that could have a dramatic impact on the future of that stock.
It may be a person who has shown a propensity to bend rules, which may bring government intervention. You would be wise to know who is running the show.
What is the Balance?
While a company’s stock may be rising, are they also adding a lot of debt? Take an examination of the overall success of the company, including the amount of debt they have incurred. This is a factor you should consider.
What Do the 10-K and 10-Q Reports Say
Each year, the Securities and Exchange Commission asks companies to file a report referred to as the 10-K. This report gives detailed information about the earnings of the company. The 10-Q comes out quarterly, and is also a good set of documents to review. Fortunately, you have access to it all.
Are There Any Red Flags?
Is there anything about the company that you should be worried about? While the reports may give you some indication, it also pays to see if you can find any news about the company. Is there a disgruntled board of directors? Are there lawsuits against the company?
Are there big plans for expansion that could meet opposition from environmental groups or some agency? Look and see if there is anything that should tell you that this may not be the wise investment you thought.
Will It Sustain Its Market Share?
Once you have reviewed all of this material, ask yourself the honest question of whether this company is in it for the long haul or not? Any serious investor should take the time to analyze the answers to these questions, and make an unbiased opinion about whether this is a good investment or not.
Should I Move Forward?
Now that you have examine these questions, this will help you to be able to analyze stocks in the future. For every stock you intend to invest in, even if it is for a short period of time, it pays to ask yourself these questions. If you are unable to answer them, maybe you should back off for now.
If you have further questions in the future, please don’t hesitate to ask. We love to hear from you.