Stocks Analysis

There is a lot of information to look at when performing stocks analysis such as the types of stock and the stock value. In today’s article we will take a look at the different types of stocks as well as ways to determine stock value.

There are three types of stock that we will discuss today including growth stocks, value stocks, and dividends. Investors also often refer to themselves as growth investors, value investors, or dividend investors when investing in the stock market.

• Growth stocks – a lot of investors will follow a growth strategy and they will look for those companies that are prospects for growing their sales and earnings along with other stock market information. It is important to note that a stock’s price reflects how profitable investors think a company will be in the future. Those stocks that increase their sales from one year to the next by at least 15% usually qualify as growth stocks.
• Value stocks – when looking at a stocks analysis value investors follow a different route. Value investors believe that the broader stock market always overreacts to news about a company. These investors try to find stocks that were beaten down due to temporary problems that can be fixed, perhaps even stocks that were hot stocks for a while. They look for share prices at bargain levels.
• Dividends – dividend investors are paid while they hold stock unlike growth and value investors who are paid only when they sell stock. Dividend investors buy stock that pay a cash dividend based on the number of shares owned, and typically on a quarterly basis. These investors look for those companies that are financially solid.

As you learn trading and investing you also must learn how to determine a stock’s value. We discuss some of the most commonly used valuation ratios below.

• Price to earnings (P/E) – this ratio is a company’s stock price divided by how much it earns per share over 12 months. When calculating this ratio you should use the most recent 12 month’s earnings. This ratio is the most widely used valuation ratio when performing a stocks analysis.
• Price to sales (P/S) – this ratio is a company’s stock price dividend by the most recent 12 months’ sales per share. You can calculate this ratio when a company loses money in reporting period. You cannot calculate the P/E in that situation.
• Price to book (P/B) – this is a company’s assets minus it liabilities. It is also referred to as the book value and it divides a company’s stock price by its book value per share. Value investors prefer this ratio over others

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