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Elements to Take Into Consideration in the Event of Choosing a Stock

When you plan on investing in stocks timing is the deal breaker. The appropriate decision made at the time that is right is what will make investing in stocks a proposition that is profitable. With the wrong timing, you will make a loss. Despite opting to buy or sell shares. Most people put their investment in stocks with the hope of getting good returns. Nevertheless making of profit is not always a guarantee. It is normally a hard task to point out the stocks that will bring profit. It requires skills to get to know the real potential of a stock among the very many listed public companies. Below are discussed elements that should be prioritized in the event of selecting a stock.

To start with the earnings per ratio should be taken into consideration. This refers to the profit that is earned on a persons share of the company. A company possessing positive earnings per share is the one that you should invest in. Attributed to the fact that companies with earnings per share that are negative should find it daunting to obtain good profits. This is because companies that have a negative earnings per share ratio normally struggle to generate profits that are good. To add to that, they also have a hard time meeting the cash requirements to run business and in distributing dividends.

The other important thing is the price earnings ratio. This normally reflects the potential that a stock has. If this ratio is high then this stock is seen to be overvalued. However investments are not to be made just after looking into the price earnings ratio. You should always give some consideration to other stocks that are in the same sector prior investing. Make a comparison of the price per earnings ratio to the earnings per share.

A company’s debt is something that just can not be ignored. To be able to determine their debt have a look at their balance sheet. Evade making investments in companies having high debts. This is because a huge percentage of the company’s profit normally goes to repay the debt’s principal and interest. Another crucial factor is the dividends. Only companies that have high profits will be in a position to pay individuals their dividends. So companies that give high dividends should be your option.

To finish with the volume of the stock should be taken into account. You should always purchase a stock having good liquidity. This means that the volume of the share that is traded on a certain exchange is good. When there is a low volume of traded shares. It is going to be hard to sell or buy a stock.

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