Online Stock Research
Online stock research is a critical part of your investing plan.
You must do your homework before you buy a stock.
Learn how to read company reports, and understand trends. Be able to review historical stock prices and company financials.
Here is information that will get you on your way to great online stock research:
A company report, is a quick way to become familiar with a company, its operations and performance.
To make this easier to understand - we will use the example of Google Inc. as we go through the various sections.
Websites like MSN Money and finance.yahoo.com give you information such as the industry in which the company operates and competes, where the company operates geographically, the number of employees the company has, their stock ticker, and the stock exchange they are traded in.
If we go to MSN Money we find the following information under the company report section about Google Inc
Ticker Symbol is GOOG
Google has 19,665 employees
Google is traded in the Nasdaq exchange
The company is in the Internet Information providers industry
This kind of information provides you with a better idea of Google, how big they are and what the company really does.
The stock activity section provides information such as the current trading price for a share of Google, the 52 week high and low, the average daily volume of shares traded, some information on moving averages and the volatility of the stock in terms of a beta.
Compare the current selling price to the 52 week high, low, and moving averages. Making that comparison gives you a feel for where the stock is trading relative to these boundaries.
The stock trading volume information is good to look at because a jump in volume usually means there is some kind of recent news that has caused investors to increase trading in Google.
The stock's volatility rating or beta is an indication of how much the stock moves relative to the overall market. If a beta is 1.0, then its volatility is average for the market.
Google's beta was 1.09 which means that the stock price is generally above average for the market. This is a good thing. It tells you that Google stock responds to the market, but since the beta isn't too high this is not a volatile stock.
Stock Price History
At MSN money the stock's price history is generally stated in terms of relative strength. MSN's Money examines the 3, 6 and 12 month change in the price relative to the rest of the market.
If the stock's price has exceeded the market's performance, the score approaches 100. For example the 3, 6 and 12 months relative strength of Google's stock has been in the 70's and 80's. While it has not exceeded the market's performance, the stock has not underperformed either.
Another way to look up stock price history is to go to the marketwatch website http://bigcharts.marketwatch.com/historical/and look up the stock price for a any day.
This section of the online stock reports provides you with a high level overview of the financial condition of the company.
So there you have it - Online Stock Research is not that hard is it?
It gives you an idea of the sales, net income and dividends over the last 12 months and more importantly the expected growth over the next five years.
Fundamental Stock Data
Fundamental stock data provides you with performance ratios and other information concerning the stock issued by Google. Here are a couple of observations worth mentioning:
Debt/Equity Ratio - In general, the lower the Debt / Equity ratio the better off a company is financially because it means they have less debt.
If a company has a high Debt / Equity Ratio (>0.5), the stockholders need to worry about their company's ability to make all of their interest expense payments. This should worry you too as an investor.
Google's Debt/Equity ratio is so small that its insignificant - hence the N/A. This is a good sign.
Profit Margins - Profit margins are stated in terms of a percentage of sales or revenues. Gross profit margin is calculated as (Revenues - Selling Expense) / Revenues. Gross profit margin tells us how expensive it is to sell a product.
Net profit margin takes all of the company's expenses (except for income taxes) into consideration. Profit margins will vary greatly by industry, so comparisons should only be made for companies in similar industries. As an investor, you want to make sure that the company's stock's profit margins to be as high as possible.
Google has high gross profit margins and lower net profit margins. It tells you that Google seems to be reusing most of its money in expansion but still retains a good portion of it.
This is a very important section to focus on.
Why? Earning estimates are normalized values because you are taking earnings and dividing them by the number of shares outstanding. Normalizing data make comparisons more meaningful.
Earnings are a direct indicator of the amount of profits a company provides to its shareholders.
Price to Earnings Ratio - A company's price to earnings ratio, or P/E ratio, is a good indicator of how "expensive" a stock is relative to its earnings. When evaluating stocks, look for stocks with relatively low Price to Earnings ratio.
A forward P/E ratio takes the current stock price and divides it by the expected earnings over the next twelve months.
Google's current P/E ratio is 40. This means that the company's stocks are trading at 40 times its earnings.
Is this good?
Probably not. Does it deter investors from buying Google stock? probably not.
On the other hand, Google's earnings are expected to rise over the next year. Google's forward P/E is 26.8 a little higher than the 10 - 20 range that currently.
The moral of the story? It is important to not just understand where a company has been, but where it is expected to go.