March 27, 2020 at 8:46 PM #253898Nitin BhatiaKeymaster
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Investment Checklist for Stock Market is a must so that an investor should generate decent returns in the long term. After the recent correction in the stock market, many investors are asking me how to select a good stock for long term investments. In this video, I have shared my investment checklist for the stock selection. The checklist may vary from investor to investor.
1. Return on Equity: It measures the profitability of the company. Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Because shareholders’ equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets.
2. Debt to Equity Ratio: It is a very crucial financial ratio. The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. For long term investment, an investor should prefer to invest in a company with very low debt.
3. EV/EBIDTA ratio reflects the valuation of the company. The enterprise-value-to-EBITDA ratio is calculated by EV divided by EBITDA or earnings before interest, taxes, depreciation, and amortization. EV (the numerator) is the company’s enterprise value (EV) and is calculated as follows: EV = Market Capitalization + Preferred Shares + Minority Interest + Debt – Total Cash
4. In the financial analysis, it is important to study the income statement of the company.
5. The balance sheet of the company is a true reflector of the financial strength of the company for the long term investment.
6. The valuation of the company should be compared with its peers.
7. Promoters holding in the company should be more than 50% with decent holdings of the FII’s and the mutual funds.
8. An investor should also check whether there is any bad news floating around the company.
9. You should also check all the recent events including the outcome of board meetings etc.
10. Last but not the least, the EPS or Earning Per Share of the company should be increasing along with the revenue of the company
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