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Stock Analysis Checklist

Learn how to research & analyze stocks


Checklist of important points to check when
researching growth stock candidates.
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Learn How to Analyze Stocks

"Fire Your Stock Analyst"


A Step-by-Step Guide by Harry
Domash

What

Where

One-year

Yahoo! Finance

Price chart

Why

Action

Buying a stock

O.K. to buy

(finance.yahoo.com >

while its in a

if stock

with 50-day

ticker symbol >Charts >)

downtrend is

price is

moving

Click on Technical

dangerous, as it

above its

average

Analysis in the Charts

will likely move

50-day

section. Select 50-day

lower. A stock is

moving

moving average. sample

in a downtrend

average.

if its price is
below its MA,
and in an
uptrend if
above. Use the
50-day MA.
Price/Sales
ratio (P/S)

Valuation

O.K. to buy

check. A stock

if P/S is less

(moneycentral.msn.com >

with a P/S

than

ticker symbol > Financial

above 10 is

10. P/S

Results > Key Ratios >

momentum

ratios

Price Ratios)

priced.

between 3

sample

Buying

and 5 are

momentum

best for

priced stocks is

growth

only

stocks.

recommended

Ratios

in a strong

below 2

MSN Money
Valuation Ratios

market.

reflect value
priced
stocks.

Cash Flow

MSN Money

per share

Valuation Ratios

Companies with

O.K. to buy

positive

if Cash

operating cash

Flow per

flow are safer

share is a

investments

positive

than cash

number.

burners
(negative cash
flow).
Average
Daily

MSN Money

Institutional

O.K. to buy

Price & Volume

buying is an

if Average

Volume

(moneycentral.msn.com >

important

Daily

(shares)

ticker symbol > Company

catalyst for

Volume is

Report) Look in Stock

stock price

100,000

growth.

shares or

Institutions buy

higher (0.1

hundreds of

mil), and

thousands of

above one

shares and

million

prefer stocks

shares is

with large daily

best.

Activity Section
sample

trading volumes
so they can
easily move in
and out of
positions.
Financial

Morningstar Snapshot

Invest, dont

O.K. to buy

Health

(www.morningstar.com >

gamble! Stick

if Financial

Grade

ticker symbol > Snapshot)

with companies

Health

Morningstar Stock

with solid

Grade = A,

Grades

financials.

B or C

sample

Growth Grade

Consistent

O.K. to buy if

Morningstar Stock

strong sales

Growth Grade =

Grades

growth over

A or B

Morningstar Snapshot

extended
periods
translates to
long-term

stock price
appreciation.
Lack of

O.K. to buy if

Ownership

institutional

institutions own at

(moneycentral.msn.com >

ownership

least 30% of

means

shares

mutual funds,

outstanding.

Institutional

MSN Money

Ownership

ticker
symbol > Ownership)
sample

pension
plans and
other
institutional
buyers dont
think they will
make money
owning the
stock. Why
would you
want to own
it?

Number of
Analysts Making
Buy/Hold/Sell
Recommendations

Yahoo! Finance

A companys

O.K. to buy if a

(finance.yahoo.com >

performance

total of at least four

can go

analysts are listed

unrewarded

as currently

if nobody

making strong buy,

knows about

buy, hold,

it.

underperform, or

Sufficient

sell

analyst

recommendations.

coverage is

Look only at the

necessary to

total number of

create

analysts making

investor

recommendations,

interest,

not whether there

especially

are more buys

from

than holds, etc.

ticker symbol > Analyst


Opinion)
sample

institutions.

- - - - - - - - - - Advanced Research & Analysis- - - - - - - - - - Calculator Required

Gross Margin
Trend

Changes in

Gross margin (GM) is

Income Statement

gross margin

the "Gross Profit"

(moneycentral.msn.com >

percentages

divided by "Total

ticker symbol > Financial

from quarter to

Revenue," expressed

Results > Statements >

quarter point to

as a percentage.

changes in a

Calculate the GM for

Interim)

companys

each of the past five

sample

competitive

quarters, and observe

position in its

the GM trend.

MSN Money

Income Statement >

marketplace.

O.K. to buy if the trend

Increasing gross

is flat or increasing.

margins signal a

Ignore variations of

n improving

less than 1%, e.g.

competitive

from41% to 40.5%.

position, and
declining
margins warn of
increasing
competition.
Revenue Growth
Rate
Latest Quarter
compared to
year-ago quarter

Slowing

Use your calculator to

revenue (sales)

compute the most

growth is an

recent quarters

> ticker symbol >

important red

(MRQ) revenue

Financial Highlights)

flag signaling

growth

sample

danger ahead.

rate(percentage) vs. t

Reuters
Financial Highlights
(reuters.com/finance/stocks

he year-ago
quarter.Compare that
figure to the 1 Year
sales growth listed in
the Growth Rate
section.
Ideally, the MRQ
growth should exceed
the 1-year figure,
signaling accelerating
growth. But, it's O.K.
to buy if MRQ growth
is at least 85 % of
1-Year growth.
Forecast Revenue
Growth Rate

Yahoo! Finance
(finance.yahoo.com > ticker
symbol >Consensus

Look at

Check the forecast

consensus

revenue growth

revenue

percentage for the

Estimates)

forecasts to

current quarter vs. the

sample

determine if

corresponding

historical growth

year-ago quarter.

rates are

Ideally, the growth

expected to

rate should be

continue.

accelerating but
it's O.K. to buy if the
forecast
year-over-year
revenue growth is at
least 80% of the
1-Year
growth from the
previous step.

Accounts
ReceivablesGrowt
h vs. Sales
Growth

Accounts

Compute

Income Statement

receivables are

the ratio for the most

& Balance Sheet

monies owed by

recent and the

(moneycentral.msn.com >

a companys

year-ago quarters.

ticker symbol > Financial

customers for

Ideally the most

goods received.

recent ratio would be

The Accounts

less than year-ago,

Receivables

but it's O.K. to buy if

Ratio (ratio) is

the ratiois the same or

the net

lower than year-ago.

receivables

Ignore increases that

divided by the

are less than 5%, e.g.

revenue for the

from 60% to 64%.

MSN Money

Results > Statements >


Income Statement > Interim
sample

& Balance Sheet > Interim)


sample

same quarter.
A significantly
higher ratio vs.
year-ago is a
red flag pointing
to future
problems.

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