1. Look at what the company does and how it generates revenue
Understanding what a company does and how it generates revenue are the first steps in deciding if a stock is a good fit for you. Read up on their business activity on their website, looking out for news or information specifically for investors. Check out your trading platform, too. With CommSec, you can access information about a company’s business activity when you log into your CommSec account.
2. Check out its financials
Financial reports aren’t for everyone. If the words ‘balance sheet’ and ‘cash flow’ conjure up bad memories of that business stats class you had to take, you’re not alone. Fortunately, most trading platforms do some of the hard work for you, so start there. For example, CommSec customers can log into their account, search a company and access financial data including sales, earnings, financial projections and already-calculated ratios like the current ratio.
What is a current ratio?
The current ratio is a liquidity ratio that shows whether a company would be able to repay its short-term debts quickly.
3. Use price charts to spot important trends
Price charts show you medium to long-term trends in a company’s share price history. They’re useful when exploring an investment opportunity, or to confirm (or overturn) a hunch about the direction of a share price. While understanding how to use charts can take some time to master, CommSec provides a range of interactive tools to monitor the performance of a company over a given period of time.
4. Monitor the stock
Monitoring stocks you’re interested in can help you decide whether it’s the right time for you to invest. A tool that can help is the watchlist. This is simply a shortlist of companies you want to keep an eye on. Adding a stock to your watchlist keeps those stocks top of mind and makes it easier to access share price moves, charts, news and other key details.
How to set up a watchlist
Watchlists are easy to set up, and manage from your CommSec account or the CommSec app. Simply navigate to 'Watchlists' and click 'Add Watchlist' and search for the stock code of the company you’re interested in.
5. Look beyond the numbers
As well as researching a company’s financials, look at the landscape it’s operating in, and how it’s positioned in that landscape. A company on the sharemarket has an obligation to keep investors adequately updated. This includes any changes to their goals, unexpected developments which could impact investors and acquisitions. This information is publically available either on the CommSec app or website, via their social media pages or company sites.
You might also want to consider:
• Does the company have a competitive advantage within its industry?
• Is it easy or difficult for competitors to enter its industry or market?
• Are there any events or economic conditions that could impact the company?
• Does it provide a product or service that could be easily substituted for another?
• Do the company’s customers or suppliers have a lot of power over its prices?
6. Hear what the experts have to say
You can find daily expert commentary from CommSec’s team of market analysts and economists on our website or bite-sized versions across our social media channels. CommSec users also get access to Goldman Sachs and Morningstar, with in-depth information on hundreds of stocks.
Now you have some suggestions to get you started on your research journey, but do you know where to find investment ideas? Head here for some inspiration.
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Important information
Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited (formerly Chi-X Australia Pty Limited), a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.
This information is not advice and is general in nature. The information has been prepared without taking account of the objectives , financial situation or needs of any particular individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives , financial situation or needs, and, if necessary, seek appropriate professional advice. You can view the CommSec Terms and Conditions, Product Disclosure Statements, Best Execution Statement and Financial Services Guide, and should consider them before making any decision about these products and services.
Past performance is no guarantee of future performance.