Choosing a company for investment purposes is not always an easy one. While resources and information on companies may be found online in places like Player.fm, sometimes the best signs of an investment-worthy business can be found in more traditional places and uncovered with a little bit of footwork. Remember that the two main issues to consider when determining the worthiness of business include an evaluation of the strength of the company, and then determining whether the price of a stock or crypto investment makes a purchase a wise investment decision.
The company’s financial statements are solid, even if they are imperfect.
Ideally, you would hope to find that a company has experienced steady and strong growth and exhibits the capability to continue this trend over time. While it is unlikely to find a company in which to invest that carries with it a perfect record, taking a careful look at the occasional setbacks will help you understand the context in which these might have occurred. It is natural to see issues during recessionary periods, but locate and peruse key statistics such as revenue, earnings, and cash flow, especially over the most recent several years.
Specifically, you want to see that the company is profitable. You will also want to know if the revenue and earnings have increased over time, a clear hallmark of a company that has the capacity for scalability and sustainability. You will also expect to see that the operating expenses are covered by cash flow. The information provided by the company may be useful, but it is also advisable to access financial statistics directly through the SEC-EDGAR database by entering the ticker and fiding 10-K filings that are associated with the annual reports. While past performance is not a guarantee of future successes and returns on investment, they can provide information regarding whether a company may grow and deliver returns for shareholders.
The company presents the same on paper and in person.
A great deal of information can be learned by visiting a company’s facilities and talking to employees and customers. Shopping at stores of companies in the retail sector can tell you if the sales floor is busy and abuzz with consumers or if the aisles are empty. See the merchandise first hand, and compare its quality and pricing with the commodities offered by the competition. Interact with the employees on the floor to determine whether or not they are well-trained, helpful, and knowledgeable about the business’s brand, its story, and its business practices.
If you are investing in a non-retailer, talk to people who are employees, customers, or vendors to get a sense of how the business operates and how the company treats those who interact with them. Try the business’s products or services yourself, and make an honest determination of its quality, pricing, and value. Survey industry professionals to see what they think about the company, especially in areas such as service levels and innovation. Store visits and conversations with employees can provide many insights into the overall health of an organization. The goal is to contrast the corporate image with reality to see if what is presented on paper is consistent with what is occurring in person and practice. Constancy, reliability, and transparency are a significant indicator of an investment-worthy company.
Watching the financial news provides evidence of industry growth and market activity.
Financial news provides insights about a specific company, but can also give you information about the industry and overall market activity which ultimately impacts a stock’s value. Checking Bloomberg.com online or via a mobile app will help you access headlines that relate information about global economies, give you a market snapshot, note analyst ratings, and peruse company and industry news.
The news should give you updates about company earnings, expansion plans, and product introductions or innovations. You should note how your potential stocks grow or shrink in value based on the movement of market indexes, which can be a reflection of general investor attitudes toward your investment choices. Utilizing this information to determine consumer sentiments toward the company’s products, services, or business and marketing practices is also a valuable tool in consideration of sustainability.
In conclusion, selecting investment-worthy businesses for your portfolio should involve making general observations, reviewing financial data, and garnering information about the company’s business practices and the potential for long-term growth. Getting a sense of what people are saying about the company’s past and potential for the future will help you make an informed investment decision.
What are signs you feel matter in determining whether or not to invest in a company? Feel free to comment.