Evaluation of Stocks

The following factors has to be considered before investing in shares.

Company History - Ten years of solid performance withstanding recession and showing stable results.

Dividend - Money paid by the company for the existing shareholders to share the profit, and it can be quarterly and half-yearly and annual, the long term investors will be benefited as it gets compounded annually.

Market Cap - The market cap is the amount of sales, the company will make in a given year, it has to be above 10 million, and anything less will end in bankruptcy in the end.

Cash Flow - The profit a company will make in a year, it has to be really high to avoid bankruptcy.

Price Earnings Ratio - Expectation from stock, has to be between 10 and 30, it this show high, the expectation is really high from the investors, if the expectation is not met, then the company share may lose its value drastically, and also lead to bankruptcy, any value above 25 is a good one.

Return on Assets and Return on Equity - If the ROA and ROE are rising over a period of years, then the investors can buy the share, if the ROA and ROE are on the reverse, one has to think twice before investing in this company.

Financial Leverage - It tells about the company's acquisition in debt, one has to avoid investing in these stocks that has the value of above 5, on the other hand it will be high for banks and financial institutions.