Analyzing stocks
It is virtually impossible to predict whether a company will do well on the market. This also applies to speculating on the price of shares . Investors with years of experience can still be wrong. You can be convinced of a good outcome, but you are never certain. There are some basic principles that you can start with. A good stock analysis will take you a long way. Read about how to analyze shares well and how you can apply this information.
Analyzing Stocks: Gather Information
The first sources you can look at are provided by the company itself. If a company is listed on the stock exchange, a company also has an obligation to publish a number of data. You can use this data well for your analysis. At DEGIRO, for example, you can perform various analyses, including for the DEGIRO share itself. Since the merger with flatex, they have been listed on the stock exchange in Germany as ‘flatexDEGIRO AG’.
Examples of these sources are:
- Company press releases: Every time a significant change occurs within a company, they send out a press release so journalists can write about it. Think of important positions that have been filled by someone else, departments that may disappear in the future. This way you are aware of the latest updates.
- Annual report and annual accounts: In the annual report, a company states what is happening within their organization. This is an important document when you are going to invest. Take the time to read the annual report in its entirety.
- Shareholders’ meeting: Have you already purchased your share? Then you have the right to attend shareholders’ meetings. Here you can meet the board and ask questions directly that you have not yet found the answer to yourself.
First, you perform a fundamental analysis of the company using the documents above. It is advisable to do this for multiple companies from the same sector, then you can compare them. Putting these analyses side by side can yield a lot of interesting information. Is a position of a certain share noticeably stronger or weaker?
In addition to looking at this data from a fundamental analysis, you can also analyze shares with a technical analysis. With a technical analysis, you mainly look at the price development of the share. What has the price of the share done in the past? Can you discover patterns?
Trend and sector analysis
Some companies hire someone who is always up to date with the latest trends. As an investor, it is important to be concerned with this. To what extent has the technology within a sector already developed? How is a trend developing? How long will this trend last? What influence will this have on this sector?
For example, a trend could be people trying to eat less meat. Then you could possibly invest in companies that have a ‘vegan’ mentality. There is a big chance that this sector will grow and demand will increase in the future.
Long-term competitive advantage
A good product or an interesting service always has a USP. This means ‘Unique Selling Proposition’ and is a characteristic that makes them unique. If this unique aspect also has something timeless, the company or brand will have an advantage over its competitors. An example of this is M&Ms. Chocolate that melts in your mouth, but not in your hand. M&M has a good marketing team and has long since conquered its permanent place in the market. As an investor, this also gives more certainty.
Using Financial Measures and Ratios in Stock Analysis
Key financial ratios can be found in the annual accounts. Ratio figures are composed of the annual accounts. These are some financial data that can help in the analysis of a share.
Internal signals
Do you notice anything else? Have there been many layoffs in a short period? Have important board members resigned? This could indicate internal problems. These internal signals can affect the value of the shares on the stock exchange. Be aware that this is a piece of speculation.
Analyzing Stocks: Analyst Reports
Every now and then analysts publish a report with their recommendations. These analysts often work for banks. These reports are interesting. Not to blindly follow but to compare with your analysis and possibly improve it.
Compare brokers and start investing in stocks
Are you excited about investing in shares after reading this article? Use our comparison function and find the broker that suits you best! With a broker, you can execute orders yourself and start investing. When you make your first purchase of shares, definitely use these tips and information to ensure that you increase the chance of a good share purchase.