Stock research is the process of analyzing and evaluating a company’s performance, financials, and prospects before investing in its shares. Stock research can help investors find the best investment opportunities, avoid potential losses, and achieve their financial goals.

However, stock research can also be overwhelming and confusing, especially for beginners who are new to the stock market and its terminology. There are many sources of information, data, and opinions available, but not all of them are reliable, accurate, or relevant. Therefore, it is important to know how to research stocks effectively and efficiently, and what to look for when doing so.

Learn how to research stocks efficiently with our four-step guide. We’ll also share helpful tips and tools.

Step 1: Gather your stock research materials

To research stocks, gather materials and resources to understand the company and its industry. Common sources include:

• The company’s website: This is where you can find the company’s mission, vision, values, products, services, customers, partners, competitors, and history. You can also learn about the company’s culture, values, and social responsibility initiatives.
• The company’s annual report: This is a document that the company publishes every year, which contains detailed information about the company’s performance, financials, operations, strategies, risks, and outlook. You can find the company’s annual report on its website, or on the Securities and Exchange Commission (SEC) website.
• The company’s quarterly report: This is a document that the company publishes every three months, which contains updated information about the company’s performance, financials, operations, strategies, risks, and outlook. You can find the company’s quarterly report on its website, or on the SEC website.
• The company’s earnings call: This is a conference call that the company hosts every quarter, where the company’s management discusses the company’s results, achievements, challenges, and plans. You can listen to the company’s earnings call on its website, or on various financial websites and platforms.
• The company’s news releases: These are announcements that the company makes to inform the public about its latest developments, events, achievements, partnerships, acquisitions, awards, and more. You can find the company’s news releases on its website, or on various financial websites and platforms.
• The company’s analyst ratings: These are opinions and recommendations that financial analysts provide about the company’s stock, based on their research and analysis. Analyst ratings can range from buy, hold, sell, or variations of these terms. You can find the company’s analyst ratings on various financial websites and platforms.

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Step 2: Narrow your focus

Narrow focus, identify key aspects of company and industry. Many factors and metrics to evaluate, not all equally important. Know key terms and concepts to assess strengths, weaknesses, opportunities, threats. Common and useful factors and metrics include:

• Revenue: This is the amount of money that the company generates from its sales of products or services. Revenue indicates the size, growth, and market share of the company, and its ability to attract and retain customers.
• Earnings per share (EPS): This is the amount of money that the company earns for each share of its stock. EPS indicates the profitability and efficiency of the company, and its ability to generate value for its shareholders.
• Price-to-earnings (P/E) ratio: This is the ratio of the company’s stock price to its EPS. P/E ratio indicates the valuation and expectations of the company, and how much investors are willing to pay for its earnings.
• Price-to-earnings-growth (PEG) ratio: This is the ratio of the company’s P/E ratio to its expected annualized earnings growth rate over the next few years. PEG ratio indicates the valuation and expectations of the company, relative to its growth potential.
• Dividend: This is the amount of money that the company pays to its shareholders on a regular basis, usually quarterly or annually. Dividend indicates the stability and confidence of the company, and its ability to reward its shareholders.

• Dividend yield: This is the ratio of the company’s annual dividend to its stock price. Dividend yield indicates the return and attractiveness of the company’s dividend, relative to its stock price.
• Market capitalization: This is the total value of the company’s outstanding shares, calculated by multiplying the number of shares by the stock price. Market capitalization indicates the size and importance of the company, and its influence in the market.
• Industry: This is the category or sector that the company belongs to, based on its products or services. Industry indicates the opportunities and challenges that the company faces, and the competitive landscape that it operates in.

Step 3: Turn to qualitative stock research

The next step in stock research is qualitative analysis. This means going beyond numbers and data to understand the intangible aspects of the company and its industry. Qualitative research helps to understand the company’s vision, values, culture, innovation, leadership, reputation, and competitive advantage. Sources for this type of research include:

• The company’s mission statement: This is a statement that summarizes the company’s purpose, goals, and values. It can help you understand the company’s identity, direction, and motivation.
• The company’s vision statement: This is a statement that describes the company’s desired future state, and what it hopes to achieve in the long term. It can help you understand the company’s ambition, aspiration, and inspiration.
• The company’s SWOT analysis: This is a framework that identifies the company’s strengths, weaknesses, opportunities, and threats. It can help you understand the company’s internal and external factors that affect its performance and potential.
• The company’s value proposition: This is a statement that explains the company’s unique selling point, and how it solves a problem or satisfies a need for its customers. It can help you understand the company’s differentiation, innovation, and competitive advantage.
• The company’s customer reviews: These are feedback and ratings that the company’s customers provide about its products or services, based on their experience and satisfaction. They can help you understand the company’s quality, reliability, and reputation.
• The company’s employee reviews: These are feedback and ratings that the company’s employees provide about their work environment, culture, management, and benefits. They can help you understand the company’s culture, values, and leadership.

Step 4: Put your stock research into context

The last step in stock research is comparing the company with its peers, competitors, and industry benchmarks. This helps evaluate the company’s performance, position, and potential, and determine its value. Common ways to do this include comparing ratios, analyzing industry trends, and assessing the company’s position in the market.

• Compare the company’s financial ratios and metrics with its peers and industry averages. For example, you can compare the company’s P/E ratio, PEG ratio, dividend yield, and market capitalization with those of its closest competitors and the industry average, and see how it stacks up.
• Compare the company’s growth rates and projections with its peers and industry trends. For example, you can compare the company’s revenue growth, earnings growth, and dividend growth with those of its closest competitors and the industry trend, and see how it performs.
• Compare the company’s qualitative factors and features with its peers and industry standards. For example, you can compare the company’s mission statement, vision statement, value proposition, customer reviews, and employee reviews with those of its closest competitors and the industry standard, and see how it differs.