Stock Analysis

How to conduct a stock analysis

Analyzing is a process:

1. One particular industry or a sector at a time
2. Focus on select companies within the sector
3. Deeply probe the affairs in the financial statement
4. Take a closer look at the earnings forecasts.

What to analyze:

1. Industry Analysis

- Annual Report
  -- Good Overview   
  -- Future growth outlook

2. Business Model Analysis

- Annual Report
  -- Companies strngths and weakness
  -- Industry Report

3. Financial Strength

- Balance Sheet
- Income Statement
- Cash Flow Statement

4. Management Quality

- Key Executives

5. Growth Analysis

- Profit Margins
  -- Profitablility Trends in a particular industry

6. Valuations

- Value Investors look at intrinsic worth
  -- Growth investors look at is the earning potential
- A company selling at a higher PE ratio must grow at a higher price

7. Target Price

-Future earnings first
- Calculate high and low target price by multiplying estimated EPS with estimated high and low PE ratio.
- High and low target prices are the price band within which the future stock price is likely to move in response to the expected future earnings.

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Happy Trading!