Best Stock Hints Latest Tips To Buy & Invest Best Stocks Today
In this how to tutorial, you will learn about the top 6 criteria for you to consider for finding those undervalued stocks poised to take off. By knowing how to apply these criteria, you will be in a better position to make more money in the stock market.
We all would love to get in at the bottom floor of a wonderful upcoming business ready to ride the profit elevator up to new heights.
You may be asking yourself: “Where do the best opportunities lie in finding those best-of-breed businesses ready to take off in the markets?”
Having a simple set of criteria to help guide you in your decision-making process is critical to consistently picking those winners.
Here are the top 6 criteria for you to consider for finding those undervalued stocks poised to explode:
1. Company size:
Look for small to mid-cap companies with a market capitalization between $250 million and $1 billion. These emerging companies have the greatest potential for upside growth in terms of market exposure and profitability. The Apple’s, Google’s and Wal-Mart’s of tomorrow all started with humble beginnings.
2. Stability:
Look for companies that have a low Beta ratio of less than 1.0. Beta is a measure of the sensitivity of the company’s returns compared to market returns. In theory, a stock whose returns vary less than the market’s returns has a Beta with a value less than 1.0, thereby being less volatile and potentially risky.
3. Solid Fundamentals:
Look for companies that show growth rates in excess of 10% per year consistently over at least a 5-year period for the following:
• ROIC – return on investment capital
• BVPS – book value per share or equity
• EPS – earnings per share
• Sales, and
• Free Cash Flow
The key is to identify those businesses that have consistent year-over-year growth rates. The major stock market websites that post company financials will have the raw data that you need in order to calculate the growth rates.
4. Value:
Look for a PEG ratio that is less than 1.0. A lower ratio is better indicating that it is a cheaper and healthier stock than a higher ratio, which is more expensive. PEG is calculated by dividing the P/E ratio by the earnings per share (EPS) in order to better compare companies with different growth rates.
5. Global Exposure:
Find out if the business in question earns most of, or a large percentage of, its income from international markets. With America no longer being the most important economic market for businesses in today’s global economy, finding a company with international exposure to its products and/ or services is critical.
6. Stock Value vs. Stock Price:
Look for businesses where Mr. Market has priced the stock below the fair market value of the business. Ideally, you are looking for a stock price that has a big margin of safety (MOS) price of 30 -50% below its fair market or intrinsic value price.
Several subscription websites provide fair value estimates for businesses. However, should you like a simple approach to help you assess the MOS price for a business, please check out the articles on best-of-breed analysis at Stock Investing Simplified.
Once you have used the 6 criteria outlined above to identify potential companies, place them on your personal watch list. As the name implies, a watch list is a simple list of potential stocks in which to invest at some point in the future.
Now it’s time to get up close and personal and to only invest in those businesses that you understand and that you would be willing to monitor on a weekly basis for any changes to the fundamentals, market forces or competition.
This simple, step-by-step approach to analyzing stocks should help you identify those emerging companies with the potential of rising to new heights.
I encourage you to get started today in finding those great stocks that have the potential to produce consistently high returns for you.
Disclaimer: Any information shared on Stock Investing Simplified does not constitute financial advice. Stock Investing Simplified is not a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities readers or customers should buy or sell for themselves. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser.
source
