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May 26, 2015

How to select a company while investing in Share/stock market ?

  5/26/2015 No comments

There can be hundreds of parameter to select a nice company for investment of your 
hard earned money but here I am providing at least ten factors upon which one can 
think of selecting a company stock.


1.Industry It is important to understand that what kind of industry has growth potential.There are
several stocks that are associated with it respective industry .Say for instance Auto 
industry,Real Estate,Software,Cement,Pharmaceutical,Tyre,Logistics,Consumer goods, banking,Oil and Gas etc. there are hundreds of industry. We can do little research to 
figure out which industry has real growth potential. Pharmaceutical,Consumer Goods there are one of those hot industry that is believed to
give handsome return over investment whereas Real estate industry is kind of seasonal
and less attractive industry out there in market.
2.Growth prospect: While selecting company to invest we shall check growth prospect ,do the company 
has proper reserve,strong balance sheet for growth across region and globe.Say for 
example Apple inc. setting on huge cash pile(more than $100 billion and they can 
grow across globe easily. They can open hundreds of offices around world ,they can
spend billion over research and development and launch unique product. They can make acquisition of other company and do the lot more.So we can prefer 
these kind of stock to buy.
3.PE ratio: Price of the stock should be less than respective industry PE.It may be equal but 
should not be too much higher.

4.Business expansion: Do the company has plan to grow across region or across boundary.Do they have 
adequate fund to invest in R&D ,do they have plan to launch new product in their 
portfolio? These are the kind of information we should be having while investing 
into any stock.

5. Dividend payout Every profitable organisation pay dividend less or more to its shareholders.Preferential 

shareholders gets dividend all the time whereas common shareholder get based on 
company decision.It is important while considering a company for investment whether 
they share chunk of profit with shareholders or not.We should prefer a company which 
burns lot of profit as dividend to shareholders.

6.Financial result We should carefully study quarterly results of company ,we should check that whether 
they are sharing result to stock exchange on regular basis or not.Comparing every 
quarter result would give a fare idea about how good the company has performed in 
the previous quarters. Is.Is there any chances if their good result going to repeat in 
coming quarters.Before we go ahead and buy any stock for future we should make sure 
that company has fare chance to do better result in coming quarter or years.

7.Stability in market Company's stock can do worse if by nature company management are not good or 
they are doing fraud or misleading investors by not providing exact information to stock
exchange about good or bad happenings in company. So we should check whether they are complying stock exchange policy as well.

8.EPS(Earning per share) Earning per share is one of the important aspect while considering a company stock for investment.We should find out if the stock has future potential to improve earnings or not .If not then we should avoid the stocks completely.
9.Reserve & Liability company reserve is one of the major criteria that any invesrots should look into.
Company should have handsome amount of money or resrve to keep company's 
progress intact.We should always invest in a company that has greater reserve money 
stored compare to its liability.
10.Yearly Result & progress Find out what has been the result tarack record for past 5 years.Do the company has
ability to perform good or better compare to its peer in coming quater or years.If yes 
then go ahead and buy stock else avoid it.

Author: Vikas Pandey

He is a software and web developer working for renowned European investment bank.He loves to share knowledge through blogging whatever he knows and encourages others as well to share the same to make world a better place to live.

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