Stock Research

How to Properly do Stock Research; when newcomers to the stock market attempt to do research they might not understand some of the terms they are looking at. Understanding some of the jargon can help you make a better decision is you should purchase shares from a company or not.

You should always do stock research on a one year price chart with a 50 day moving average. Be sure the moving stock price is not below the moving average. If the price is lower than the average this may be a risky purchase. The stock is okay to buy if the price of the stock is above the 50 day moving average.

Price/sales ratio is a factor that you should consider. When you do stock research it is important to verify that the price/sales ratio is less than 10 before you buy. Growth stocks are best to buy when the ratio is between 3 and 5. Value priced stocks are commonly below 2. You only really want to buy momentum stocks with a ratio above 10 if the market is really strong.

Cash flow per share is another term you will run across when you do stock research on a company. You want to be sure the company has a positive operating cash flow. These are safer investments than a company who is in the negative. Don’t buy unless you are willing to take the risk in losing everything.

Average daily volume will be another term you should know when doing stock research. You are safe to buy from a company who has an average daily volume of shares of at least 100,000 or higher and trades more than 1 million shares. This is the best solution. Anything lower than this is risky.

It is important to do plenty of stock research before you buy shares of a company. You might come across many terms you do not understand. Be sure to understand the importance of the term and the number next to it. It may be your deciding factor if you want to invest in a company’s shares or not.

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