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 Executives5. 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.
Helpful Hints:
Lock in yields of 7% to 14% on fixed income securities and reap huge capital gains.
Research and locate closed-end funds with attractive yields and trading healthy discounts
Closed-end funds priced lower than their historic discount and avoid funds trading at a premium.
Happy Trading!
