HOW TO SELECT QUALITY STOCKS BEFORE INVESTING@LEARNING MORE

  how to find good quality stocks before investing?

1. Company business/industry 

2. Company management 

3. Financial strength 

4. valuations 

1. Company Business:

 an investor must know about company products/services before investing meanwhile this company have future demand in the coming years.

 you can see growth for these products/services over the next decade. company increasing sales and profits every year consistently.

example: nowadays EV(ELECTRONIC VEHICLE) good demand in the market for coming years petrol vehicles slowly decreasing so in the coming days petrol company sales and profits going down.

2. Company  Management :

company management plays an important role in the company's growth. good management system works on increasing sales, profits, and cashflows.

 A bad management system will avoid growth and they do not want to share the value of the business. management growing companies but they do not tell about how much debt they are taking in this case our capital gets risk.

 we need to understand how management treats minority shareholders like you and me 

example ;

a) management giving regular updates to stock exchanges (SEBI)

b) they are avoiding inside trading 

c) disclosing regular updates about performance and complaints 

we need to understand the company management compensation structure .some managements don't give returns to shareholders 

finally, you need to see the distribution of profits, future plans, growth strategy, business expansion, and returns to shareholders 

3  Financial Strength:

financial strength is a company's ability to generate revenue and cash flows .it will help the company grow and return to shareholders.

 the financial strength of a company can be measured in three key areas: profitability, liquidity, and solvency 

financial strength show company performance and the business earned a decent return on equity(ROE) over the last several years. how they utilize working capital and profits.

company financial reports like balance sheet, profit & loss account, and cash flow statement are supporting to analyze growth trend or not 

4. Valuations:

some companies are overvalued/undervalued we need to check through P/E RATIO and EPS 

some methods also we can analyze 

1 market capitalization 

2-time revenue method

3 earnings multiplier 

4 discounted cash flow method (DCF)

5 book value 

6 liquidation value 

for better understanding visit websites like NSE, BSE, SCREENER 

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