How to Research Stocks Before Investing

Nobody comes born with the innate ability to know what will happen to stock prices. To be successful at buying and selling stocks, you need to learn how to research before investing.

It’s essential to research a stock thoroughly before you invest in it. If you invest in the wrong stocks, you’ll see your funds go down rather than up.  Investment approaches often break into two schools of thought: fundamental and technical analysis.

How to Research Stocks Before Investing

- SEC filings - Annual reports - Quarterly reports - Press releases - Company presentations and reports - Financial statements - Industry research publications

Financial Information to Gather When Researching Stocks

- Revenue  - Net Income - Earnings per Share (EPS) - Book Value per Share - Market Capitalization (Cap) - P/E Ratio - Return on Equity (ROE) - Dividends 

Focus on the Financial Metrics that Matter

One way to determine if a stock is under or overvalued is to compare its value to its industry peers. This is called a relative valuation model. For example, you might look at what Nike stock is currently priced at versus how much Adidas stock costs. Or, you might compare budget airlines.

How to Analyze a Stock with Fundamental Analysis

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