SHARETIPSINFO >> Articles Directory >>Finding Stocks to Trade while trading in NSE and BSE major exchanges of Indian stock market
There is no doubt about the fact that choosing the right stocks that will appreciate in the future is the primary condition for profitable trading at stock market. Therefore, selection of the stock has to be made very carefully. There are some factors that can be considered to determine the fate of the stock. Here we are presenting some of the most important aspects of judging a stock that will ensure you find the right stocks for investment.
For the selection of the right stocks for trading you have to firstly judge how fundamentally strong a particular stock is. There are certain parameters that are considered for fundamental analysis of the stocks that is the basis of selection of stocks. Sales revenue of the company is the first aspect that is judged for fundamental analysis of the stocks. Sales revenue is the amount that a company makes in a particular financial year. Sales revenue basically indicates the volume of business that the company does in a year. Though it is a vital indicator of the financial strength of any company, you have to keep in mind that a new company will naturally have low sales revenue in comparison with the relatively older companies that are in business for quite sometime.
The earning of the company is the next thing that you have to consider for determining the worth of the company. Earning is the net income of a company that is derived after deducting all the financial liabilities of the company. For a comprehensive picture of the financial status of the company, it is wise to take note of the last few years’ earning as that will give you an idea of the future potential of the company.
Besides the sales revenue and the earning of the company you have to consider the debt and other financial liabilities of the company to get the right picture about the financial strength of the company. Remember it is not wise to invest in a company that has a huge debt in the market as that will take away the major share of the revenue. Moreover, a company with huge debt and financial liability it is not possible for the company to grow in the future. So, if you want to measure the future growth potential of a company, this is one point that needs to be carefully considered along with other factors.
Another crucial point for fundamental analysis of the stock is the asset value and liquidity of a company. The property of a company including the land and infrastructure is considered to be the asset of a company and the cash position is referred as the liquidity. These two aspects are determining factors for the financial condition of the company. The stock of a company with high assets and liquidity position is considered to be a good investment.
Apart from these factors that are used as the parameters for fundamentally analyzing the potential of a certain stock, there is another factor that is used by major portion of the investors. That is the price per earning ratio or P/E ratio of the stock. The P/E ratio is determined by dividing the current price of a single share of a particular stock with the Earning Per Share or EPS of the previous one year. The P/E ratio is believed to give you a clear idea of the demand of the stock in the market. Generally it is said that a stock with high P/E ratio is high on demand and the stock with a low P/E ratio is having less demand in the market. As a trader it is always wide to invest in stocks that have higher P/E ratio than the average.
These are the most prominent indicators of that depict the potential of the stock at the stock market. But as a stock market investor you have to realize that all these factors are equally important for judging the potential of the stock. If you think that considering any one of these points will help you to find the right stocks for investing, you are terribly wrong. You can not afford to miss any point to ensure a profitable trade at the stock market.
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