Stock Analysis Checklist
Stock analysis of beginners can be a challenging task. Often times they don’t understand the difference between the types of stock analysis which is done by the experts which include fundamental analysis technical analysis and quantitative analysis. Therefore they look for easy and free ways to do stock analysis themselves.
Before going into the fundamentals of stock analysis, it is very important to understand how stocks market works and what impacts the stock prices. For example if you want to see which is better between GOOG, YHOO and MSFT, you will need to analyze them separately. When you start analyzing a stock, the first and the most basic thing you need to see are the financial of the company. It is all available on the internet freely. The most common place to find it is in Yahoo finance site (finance.yahoo.com).
Check the profile of the company and notice the following from there:
- Company products and services
- History of the company
- Financial profile of the company
Then check the numbers in the financial reports using the following tools available freely on the internet:
One-year Price chart with 50-day moving average – You can check it at Yahoo finance website. Fro example, you can check for Honda Motor (HNCDAF and HNC) or Nissan Motors (NSANY) directly from Yahoo finance. It is OK to buy a stock if the current price is above 50 day MA. This moving average usually gives the trend of the stock.
Cash Flow per share – You can check it on MSN Money website. This number should be positive since companies with positive cash flow are safer to invest in.
Price/Sales ratio (P/S) – You can again find it on MSN Money website. P/S ratio below 2 is value prices stocks. P/S between 3 and 5 is recommended only for growth stocks.
Average Daily Volume (shares) – You can check it on MSN Money or Yahoo finance website. The average daily volume is a very important factor since institutional buying can lead to price rise of the stock. For example, you can see whether institutions are buying Best Buy (BBY) or BHP? It is recommended that average daily volume should be at least 100,000. More the better. Most shares will have maximum volumes when there is any news on them like in case of Pfizer (PFE) and Bank Of America (BAC).
Financial Health Grade and Growth Grade – These two grades can be found in Morning Star website. These are important to know the health and future of the company. Ideally the health grade should be A B or C and growth grade should be A or B.
Recommendation on buy/hold/sell – Check the Yahoo Finance website to know how many analysts give buy recommendations to this stock. For example, you should see whether the analysts are downgrading or upgrading companies like Hartford Finance (HIG) or Visa (V).
Institutional ownership of stock – You would want to know whether institutions like mutual funds pension funds, etc are having that stock in their portfolio. If they have, chances are good that they also believe that the stock is worth keeping. If not, why would you also buy it? You can check the institutional ownership at Yahoo Finance website.
Apart from the above simple points there are other complex ways like Forecast Revenue Growth Rate, Accounts Receivables Growth vs. Sales Growth, Gross Margin Trend etc which can be used to analysis a stock. You should also see what type of competition the company is facing or going to face in near future.
Related posts:
- Best stock analysis websites – Stock analysis sites which you can use
- Stock Analysis for beginners – Stock Analysis Techniques
- Technical analysis of stocks
- Fundamental Analysis of Stocks
- Historical stocks prices and historical stock quotes – How to get them?
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Tagged With 50-day moving average, Average Daily Volume, Cash Flow per share, Financial Health Grade, Growth Grade, Institutional ownership, Price/Sales ratio, Stock Analysis, Stock Analysis checklist, technical stock analysis
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