How to Research Stocks Before You Buy [How to Pick Stocks]

Investing in stocks can be a great way to generate income and build wealth. But it’s important to do your research before you buy anything.

How to Research Stocks Before Investing

Fundamental analysts focus on determining what they believe to be the intrinsic value of stocks. Many valuation metrics go into this analysis. This includes items like price-to-earnings ratios, price-to-sales ratios, price-to-free cash flow, return on invested capital, the net present value of discounted cash flows and much, much more. 

Once fundamental investors come up with a number for the intrinsic value, they compare it to the current stock price to see if it is undervalued and should be bought or overvalued and should be sold.  

Financial Information to Gather When Researching Stock

You’ll need to gather the necessary materials to conduct research on a stock before you buy. This means documents like SEC filings, the company’s most recent annual report, quarterly earnings reports, press releases, company presentations and reports and financial statements. 

Financial Information to Gather When Researching Stock

SEC filings 

Annual reports

Quarterly reports 

Press releases 

Financial Information to Gather When Researching Stock

Company presentations and reports 

Financial statements 

Industry research publications 

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