Taking your money and blindly investing them into multiple stocks is akin to gambling, and the perfect recipe for financial disaster. One of the main reasons that stock investors lose money is they do not take (or have) the time to meticulously research every single one of hundreds of stocks. Thankfully, IB Finanzas educates its clients about a few key factors that they can use to conduct effective research without putting everything else on hold.
Factors that IB Finanzas Uses to Analyze Stocks:
1) What does the Company Do?
When it comes to stock investment, one of the first things that IB Finanzas helps its clients do, is gain a thorough understanding of the company and what it does. This includes research about the product or service offered by the company, the number of countries that it operates in, how well its flagship product or service is doing, and if the company is seen as one of the industry leaders. Investing in a company without knowing what it does, is like marrying a person you know nothing about.
IB Finanzas equips its clients with a list of websites and other resources that they can use to easily obtain the above information.
2) Growth in Earnings:
The second thing to look at is the company’s profits, and whether they have been growing over the years. If that is the case, it shows that your chosen company has gotten most things right. However, while increasing profits are vital, they should go hand-in-hand with an increase in value.
IB Finanzas teaches its clients how to analyze a company’s financial statements with regards to earnings and revenue. Earnings are positively correlated to stability, which means that companies with high or increasing earnings are more aligned with a long-term buy-and-hold stock investment strategy. However, since IB Finanzas wants to assume as little as possible, the brokerage also guides its clients about researching the company’s short-and long-term plans to create new offerings, attract new buyers, and increase their revenue.
3) Price-to-Earnings Ratio:
To calculate a company’s price-to-earnings ratio, you need to look up its current stock price and divide it by the earnings that it generated during the last four quarters.
This is used to calculate a company’s per-share earnings in proportion to its stock price. For instance, if a company has a price-to-earnings ratio of 10, it shows that, for every dollar that the company earns, investors are willing to invest $10.
By comparing this company to other similar-sized companies operating in the same sector, investors can determine their target company’s relative price-to-earnings ratio. If your target company’s price-to-earnings ratio is higher than that of other companies, you must identify a solid reason for this difference. However, even if the P/E is relatively lower but is increasing steadily, the company might still be worth investing in.
Dividends are particularly important for clients who do not have the time to keep a close eye on their investments. Dividends are paid out of a company’s profits on a regular basis, and are an excellent way to make a passive income. Many conventional investors prefer investing in dividend-paying companies since they provide a steady income during times of economic turmoil. Older investors, who are looking for consistent income during their post-retirement life, also prefer investing in dividend stocks.
The companies best suited to pay dividends are those with large, consistent profits, and belong to sectors like utilities, healthcare and pharmaceutical, tech, and finance. Startups or early-stage companies might not be profitable (or, at least, profitable enough) to start paying out dividends. Some of the best dividend-paying blue-chip stocks are: Apple, Microsoft, McDonald’s, Starbucks, and Coca-Cola.
However, an important thing to look at before investing in a dividend company is its rate of dividend. If you do not plan to sell your stocks in the near future, it is best to buy shares that offer high dividends.
Fundamental analysis is a non-negotiable part of stock research, which is why IB Finanzas equips its clients with all the tools and knowledge they need to learn about the companies they are interested in. To know more about how IB Finanzas clients pick stocks or to open a trading account, please feel free to check out the brokerage’s website.