Choosing a quality stock requires analytical skills, both fundamental and technical analysis. Many novice investors are trapped in stock transactions based solely on technical analysis and ignore fundamental analysis.
Investing only by looking at the ups and downs of stock prices in the stock exchange dashboard is very risky. To help you get the best results in stock investing, here are some ways to choose the best stock.
How to Market Capitalization? What Is Liquid Stock Input?
The first step in choosing a good stock is to pay attention to market capitalization. For information, market capitalization is the share price multiplied by the total number of shares issued by the issuer and listed on the Indonesia Stock Exchange (IDX).
Market capitalization is important to look at because:
Can provide information related to how high the volatility of stock prices.
Know how much public ownership in the issuer.
Seeing the potential of the company in the future.
In addition, it should also be sought to know the nature of the stock itself. Is it somewhat liquid, liquid enough, or less liquid? A good stock is a liquid stock. Why? Because the stock is traded with a higher frequency or above the minimum limit of a predetermined frequency.
Useless capitalization value large, but less liquid. So, look for a large capitalized stock and is fairly liquid.
Observe the Income, Profit, and Margin
How is the company’s financial report contained in the capital market dashboard? To select quality stock, it is necessary to observe the income, profit, and margin. How:
Check revenue (revenue) and net income over the last two years.
Check earnings comparison in quarterly report (first quarter with second quarter) and annual report (last three years).
Consider the ratio of price to sales (P / S) and price to earnings (P / E) ratio.
Pay attention to the latest trends whether the growth is fluctuating or consistent. Or is there a big change (more than 50% in a year) up and down.
Also check the company’s margins whether the trend is generally up, down, or stay the same.
Level of Competition and Future Industry Prospects
Rapid technological developments often “kill” companies who are not ready. Do not let you get stuck buying shares of companies that are insensitive to changes.
You can compare a company with a competitor company to measure how much the overall market share for the products the company produces. Do not forget to projection the future of the industry. Whether it can survive or tend to decline.
Create Multiple Ratio Analysis Here
In choosing a good stock, there are several ratios to note, namely:
The price-earnings ratio (P / E ratio) is calculated by dividing the stock price by the earnings per share / EPS (earnings per share) of a company. Make sure the net earnings figure for several years to ensure the numbers are normal and not skyrocketed due to drastic changes.
Price-to-book-ratio (P / B ratio) to determine the fair value of shares. This indicator is obtained by dividing the stock price in the stock market with the book value value of the stock.
Price / earnings to growth ratio (PEG ratio) to take into account future earnings growth expectations and compare them with current earnings conditions. Shares with a PEG ratio close to 1 are usually valued as valuable under normal market conditions.
Management Reputation and Share Ownership Composition
The thing to note is whether the company you seek is still run by its founders or the company’s management has driven new people. Pay attention to reputation and find information related to the bios of key corporate figures to see how extensive their experience is.
Pay close attention to the Financial Statement
Viewing the financial statements do not need up to the detail that can make us so dizzy. Just note the following important things:
Consolidated Financial Statements to view overall assets and liabilities
Check the company’s ability to pay short-term obligations and the amount of long-term debt borne by the company.
Check the debt-to-equity ratio to see how much positive equity the company has and compare it with competitor data to get a better perspective.
It’s also a good idea to take note of every footnote that accompanies the financial statements and annual / quarterly reports. Financial statements can be obtained easily on the capital market dashboard.
Stock Price History At least in the last 3 (Three) Years
See the stock price history is important to do so you can get a reasonable price when buying these shares. In addition, the stock price history can also give you clues about how projected profit can be gained in the future.
Find Out Possible Option and Dilution
Corporate action such as issuing options, dilution, or other actions is important to know because it can change …