Many people do not do their own analysis of a given stock, as they do not know how, with respect to retail investor and trader, most rely on second hand information which could actually be third hand or more.In this post I will briefly try and explain some simple ways of analyzing a stock using ratios and this should help you make an informed decision....and one need not make statements like " I entered when my mind was blank " this was one of the posts in a popular chat site today.To get into the subject matter , here are some of the popular methods, and each has its own unique style, and those given below are commonly followed world over.
1. Price/sales ratio. This is derived by dividing a company’s share price by its per-share sales. I use this ratio basically because it uses data which is not tinkered with as earnings can be, and found to be quite reliable.
2. Price /book ratio: This is not a commonly used valuation indicator I use this as it is quite reliable and the modified version known as Q ration is even better.This ratio is derived by dividing the share price by its book value.
3. The Q ratio: Nearly the same as the one given above except that instead of using the book value the replacement value of the company's asset is used.
One can use the regular ratios like price/ earnings, modified cyclical P/e ratio ....need specific analytic tool? do let me will try and help you with it.Once you do get into a habit of doing such analysis, your decisions become more informed and your calls less riskier.The data required is very much available in public domain and should not be hard to find.
1. Price/sales ratio. This is derived by dividing a company’s share price by its per-share sales. I use this ratio basically because it uses data which is not tinkered with as earnings can be, and found to be quite reliable.
2. Price /book ratio: This is not a commonly used valuation indicator I use this as it is quite reliable and the modified version known as Q ration is even better.This ratio is derived by dividing the share price by its book value.
3. The Q ratio: Nearly the same as the one given above except that instead of using the book value the replacement value of the company's asset is used.
One can use the regular ratios like price/ earnings, modified cyclical P/e ratio ....need specific analytic tool? do let me will try and help you with it.Once you do get into a habit of doing such analysis, your decisions become more informed and your calls less riskier.The data required is very much available in public domain and should not be hard to find.