Skip to main content

Key Point to Check Before Investing In a Company.


Fundamental analysis of company shares is used to find a company financial health. Before making long-term investments in a stock, investors are required to do a proper analysis of that company. Technical analysis is a good idea to know intraday and short term entry and exit times in a stock. In addition, if you want to find a multi bagger share for your investment, then the fundamental analysis is the most appropriate tool you can utilise.

In this post, I am going to explain to you how the basic analysis of a stock is done. Here I will show the guideline which if someone follows with discipline, then they can simply choose the fundamentally strong company.

In order to analyse the fundamental of a company in the Indian stock market, you have to follow 5 steps.

1. Understand Business of a Company.

Before choosing a company for investing, it is more important to understand the business of that company. The company's website is a good resource to gain business information for that company. Basically, the company's share  performance depends on the business being carried out by the company, if the company's business shows good growth, then it is certain that the company's shares will perform as well.

The simplest way is to find the company's website is Google search engine, After finding the company’s website investors should be check 'About Us' 'Our Products' 'Our Presence' ‘Future prospect, like pages. More important information can be obtained from the company website.

If you are able to understand the products of the company and find it attractive, then you can go ahead with the investigation, otherwise you can avoid it.

2. Understand Financial Statement of the Company.

When you understand the business of that  company and consider a better option for investment, you can check the company's balance sheet, profit loss statement, cashflow statement. To check the financial details of a company, the screener is the most appropriate website, which I often use.

To read a company's financial statements, you must follow these steps.

Step 1. Go to screener.com
 

Step 2. Enter the company name in search box .


Apart from this website, there are more useful websites like MoneyControl.com, Investing.com, IIFFl.com which are a good way to get the company's financial statement. Which you can use at your convenience.

3. Company's Competitors.

Before investing in a company, it is also good to gather information about other competitors of that company. By doing this, we will know what is the company doing differently from its competitors in that area. Apart from this, you should be able to answer the question why you invest in that company, not its competitors. You can get the company's competitors list from the Screener website.

Just enter the name of the company stock on the screener website search box and scroll down, you will find the company Per comparison list.

4. Company's Future Prospect.

Always invest in a company whose products remain in demand even after twenty years from now. Invest in a company that has immense potential for future. I mean to say that there is no logic to invest a long-term investment in a company that makes a CD or pen drive.

If you are planning a long term investment in the company, then it is very important for you to check the company's product area.

5. Company Debt Check.

Prior to investing in a company's stock, the debt of that company is a factor which should be investigated by every investor.
A company can not reward its investors and not perform well if the debt burden is excessive on that company. According to the rule, always invest in a company whose debt / equity ratio is less than 1. You can find information about a company's debt / equity ratio from the Screener website.

The following points shown above should always be preferred by the investors. I mean to say that an investor, who is choosing a company for his investment, understands the business and its products in a better way. The deeper the investor will study the company, the better the returns will get from that company. If this post of mine proves useful to you, then please let know by commenting on it.


Labels:

Comments

Post a Comment

Popular posts from this blog

Eight golden rule, which every investor should follow before taking an investment decision in a company.

When I decide to buy stock, a common question rise in my mind, Is buying this stock is worthwhile?  Often such questions tend to tighten investors. Getting answer such questions are not less than solving a puzzle. An attentive investor must follow stock investing as if they are attempting to solve a puzzle. As an investor, if I want consistent return from the Indian equity market then I must choose fundamentally strong stock for investing. Here’s eight golden rules that investors should follow 1. Choose a fundamentally strong company for investment. To find a fundamentally strong company, we can filter out healthy companies using two-minute drill so that further investigation can be done. In a two minute drill, we assess the company's seven financial ratios and its tendency. Every investor should know about these eight financial ratio analysis. Every investor should look these points very carefully. Earning per share (EPS)- Should be growing in last five years....
9 comments
Read more

My First Post as a Blogger

H ello reader, how are you guys? I hope you all will be healthy and fine. I am new to Blogger my name is Ashish Solankee I live in Gadarwara tehsil of Narsinghpur district of Madhya Pradesh. I do not have much experience in about writing, but I have a lot of share market experience which I want to share with you people through this blog. I am a farmer by profession, And I am enjoying a lot my profession. An early stage of my life I start to realize that How difficult it is to live in this period of inflation, and if I want to strengthen my financial status, then I should think of other sources of income. That's why I have adopted the investment route for my future financial security. When I talk about investment, there are lots of investment options available for me such as stock market, commodity market, mutual fund, government bond. But if I talk to myself, I consider the stock market as the best investment medium for me, other investment options are too good but I do not have...
5 comments
Read more

Stock Analysis - Ashok Leyland.

I started screening for a quality business, which I understand and there are long-term competitive advantages and possibilities to generate free cash flow. In my mind, I decided to focus on the automotive industry in India because it is going through a recession and has been in the discussion for bad reasons (high interest rates, inflation, low sales, etc.). It is not uncommon to find a less valuable and reasonably strong business in an area that is undergoing temporary recession or recession. I restrict my screening to the automobile sector. Also, within the automobile area, I decided to concentrate or limit on screening for commercial automotive manufacturer. My screening process within the commercial vehicle manufacturer company area had been narrowed to those companies who have earned a return on equity of 15% higher, with internal accretion (lower credit level and negligible equity dilution) And the sound has increased through working capital management. The scre...
8 comments
Read more