Invest to Financial Freedom - Questionnaire to choose a stock
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Everyday I visit a lot of forum and read a lot of questions that people discuss. One of the hot topics is how to choose a stock?
We all know we must invest but sometimes it is hard for us to start. No wonder guide to choosing a stock is a hot topic for many peoples in forum.
Today, I’m going to share with you in this blog a questionnaire to choose a stock that I found in Richdad.com forum. I don’t know whether is it 100% truth, but I think it is a good list for reference.
Here is the list :
Value Analysis - Why the stock price won’t decrease.
General Company Knowledge
How much earnings have been retained since the previous year?
What is the net worth of the company?
Company Efficiency
Is the return on equity greater than ten?
Is the return on assets greater than five?
Financial Solvency
Is there at least twice as many total assets than total liabilities?
Is there at least twice as many liquid assets than total current liabilities?
Is there three times less total liabilities than net stockholder’s equity?
Market Value Retention
Is the stock price less than five times the revenue per share?
Is the stock price less than thirty times the earnings per share?
Is the stock price less than three times the assets per share?
Is the stock price less than five times the book value per share?
The P/E Multiple
Is the price to earnings low relative to the company?
Is the price to earnings low relative to the industry?
Is the growth rate fifty percent more than the price to earnings ratio?
Peer Review
Has the company outperformed the market?
Has the company outperformed its competitors?
Silver Question
What has pushed this company to become undervalued?Income Analysis - Why the stock won’t flat-line.
Shareholder Responsibility
Does the company offer a dividend or share buyback plan?
Sustainability of the Dividend
Is at least twenty percent of the stock’s value covered by cash?
Has the company not cut the dividend in recent memory?
Has the company not suspended the dividend in recent memory?
Silver Question
Why will the company be able to continue to increase and pay it’s dividend?Growth Analysis - Why the stock price will increase.
In regards to the past five years:
Income Statement Analysis
Did revenue increase every year?
Did gross profit increase every year?
Did net income increase every year?
Was the net income growth healthy?
Was the net income growth sustainable?
What is the one year net income growth rate?
What is the four year net income growth rate?
What is the four year earnings per share growth rate?
What is the four year earnings per share growth rate?
Balance Sheet Analysis
Did the total current assets increase every year?
Did the total assets increase every year?
Was the total assets growth healthy?
Was the total assets growth sustainable?
Did the total current liabilities remain constant or decrease every year?
Did the total liabilities remain constant or decrease every year?
Did the total net stockholders equity increase every year?
Was the total net stockholders equity growth healthy?
Was the total net stockholders equity growth sustainable?
Company-Stock Relations
Does the company have a good track record of setting reasonable earnings expectations?
Silver Question
What will cause the company to earn more in the future?Analyst Analysis-Why the stock will move.
Pressure Analysis
Are there at least seven analysts tracking the company?
Are there no more than fifteen analysts tracking the company?
Direction Analysis
Has an analyst recently upgraded the company?
Has an analyst recently downgraded the company?
Why have the analysts upgraded/downgraded the company?
Project Earnings Analysis
Do the analysts have a good track record of predicting earnings?
Does the company have a good track record of surpassing the projected earnings?
Are the projected earnings positive?
Do the projected earnings show an improving growth rate?Silver Question
Will there be a significant amount of positive pressure to move the stock?Qualitative Analysis - To what extent the company will move.
Management Analysis
Is most of the management over the age of forty?
Does most of the management have at least five years in-company experience?
Does most of the management have at least ten years in-industry experience?
Does most of the management have at least fifteen years business experience?
Does most of the management have at least a bachelor’s degree in business management?
Has most of the management been buying shares in the past year?
Does the management pay themselves less than $999,999.99 per year after salaries, bonuses, and stock options?
Does the company have healthy corporate governance?
Business Model Analysis
Give a brief description of the business.
Describe the business model.
Is it easy for an outsider to understand the industry?
Capital Reinvestment Analysis
Does the company focus on investing time and money into the original brand name?
Does the company have an invaluable brand name?
Does the company have a healthy and innovative product portfolio?
Has the company not tried to diversify its product portfolio?
Does the company have a healthy and innovative product pipeline?
Silver Question
Is the company in a fool proof state, even though qualified people are running it anyway?Technical Analysis - What are mechanics of the stock.
Accessibility Analysis
Does the company have a volume greater than five-hundred thousand?
Does the company have an average daily volume greater than five-hundred thousand?
Risk Analysis
Is the beta of the company less than three?
Trend Analysis
Is the company trading above the twenty, fifty, and one hundred day moving averages?
Has the stock outperformed the Standard and Poor’s five hundred?
Has the stock been heading for a convergence or divergence, relative to the S&P 500?
Silver Question
Will you be able to easily get in and out of the stock and is it hunting with the pack?
GOLDEN QUESTION
WHAT WILL CREATE THE BUYING PRESSURE FOR THE STOCK?
Source : Ricdad.com ForumÂÂ
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Great Article - keep up the good work!