How to read financial of any company, what parameters can be seen in it to select good stock for investment?

Answer 1

i would highly advise not to invest in a single company. generally, you would have to invest in over a hundred carefully chosen companies across a wide spectrum just to have good diversity. i would recommend that you instead invest in a mutual fund. This will automatically invest in many different companies and is managed by a financial/stock/bond expert.

as far as financial parameters... ... past performance is not an indicator of future performance. the number one comapny in 1994, was probably the 5,000 company just 2 years later.

i recommend vanguard.com they have a lot of funds that are real good, and make the forbes best buy list. more importantly, they have real low operating and fee costs. which means you get to keep more of the money that is being earned.

Answer 2

There are number of parameters which should be seen to select the stock. Only you can able to read the companies results if you have the knowledge of accounts. You should see the product of the company and the know about the management of the company. If in the coming days the demand of product will increase with the increase of profit on the sales and the management of the company is friendly to the investor ( see the past record of the company ) . this is one parameter of the company.

Answer 3

Selecting a stock for investment depends on what sort of investor you are. Are you a technical investor or a fundamental investor or do you combine both styles of investing?

Technical investors tend to invest in stocks for short term, ie days or a few weeks and are usually termed as traders. Fundamental investors tend to invest in stocks for the long-term, i.e years at a time e.g the well know Warren Buffett.

If you are a technical investor, you use technical indicators to select your stock. There are vey many technical indicators that you can use depending on your preferences, but for the most part you select a stock using primary, technical indicators and support your selection with secondary technical indicators before you take a trade or enter a position.

As a fundamental investor, you would mainly focus on the financials e.g
For the statement of financial performance or Income statement you focus on these items:
1)EPS 2) P/E ratio/multiple 3) Pay out Ratio 4) Ratio of iNterest income

For statement of financial position or balance sheet focus on e.g:
1) % Gearing 2) Stock Turn Ratio 3) Capitol-Asset Ratio

Also, focus on the Cashflow statement to see how long/short the business cycle is and how fast they turn inventory/services into profit.

Fundamental analysis involves looking at a lot of mathematical equations and figures in order to complete your analysis. In many cases, it's better to consult an accountant to analyse the figures and give you the final ratios or percentages, then make your analyses from the ratios.

Also, the fundamental ratios, figures you use will depend on what type of statement you are looking at and what your analysis preferences are.

I just want you to know that selecting a good stock is not about gambling or guessing, but making educated analyses. If you guess, then you are essentially gambling and are actually risking losing your money. My main tip to you is never invest in anything you do not understand. I, personally have a preference for technical investing with some fundamentals included.

Answer 4

I suggest buy Peter Lynch's book "One up on Wall Street".
All these numbers of PE, EPS, Price to book are taken into account by 1000s of mutual fund companies but they still lack behind S&P 500 Index fund. They apply mathematical formulas and have a staff who analyze it to make recommendation. There are few who are like Warren Buffet. Even he made mistakes by not investing in high-tech companies because he didn't understand it. Open an a/c with a broker (tdameritrade.com) they provide analysis of many stocks from S&P, Street.com, Goldman Sach and others. Read the analysis, if it makes sense and if you believe that this company is right track, go for it. The basic rule of Peter Lynch is that "invest in a company where you understand what they are doing for living". If you don't have any idea, don't buy it.

Answer 5

Read Jim Cramer's Insane investing in an insane world he does a descent job at explaining all of that