How to Become a Smart Investor by Reading the Stock’s Quote Page
TO become a smarter investor, you need to look at both the stock price and the underlying metrics used to evaluate a company and stock against both peers and over time.
Here are 9 things more important than price that are available to investors to check on a stock’s quote page before deciding whether to buy or sell.
1. 52-week High and Low
A stock’s 52-week high or low is a price range that helps an investor see where the stock is trading, relative to how it has traded over the past year. Expert traders would prefer to invest in a stock that is trading closer to its 52-week high than its 52-week low.
The stats can be found under the “overview” tab in a quote page.
2. Analysts’ estimates for EPS and revenue
It’s smart to compare a company’s financial performance against its competitors when assessing its financial performance. This can be found under the “analyst estimates” tab on a quote page.
A look at the yearly numbers will show the EPS estimates for the current year as well as for the next two years, as compiled by FactSet, in both table form and as a chart.
3. Dividend yield
To see if the company has consistently paid a regular dividend, select “dividend” under the “events” tab. It is best viewed relative to a company’s peers, the broader stock market and the yield on the 10-year Treasury note.
Also on the “overview” page is the dividend yield, or the annual dividend rate per share divided by the stock price.
4. Free Cashflow
Free cash flow is the cash generated from operations after expenses and capital investments.
How free cash flow changes over time is useful in judging the current strength of a company’s business and its growth potential.
The more cash available to a company, the more it can spend to expand.
This can be found under the “financials” tab.
5. Gross Profit Margin
Gross profit margin, and the change over time, is another important measure of a company’s profitability.
This is calculated by dividing gross income — sales minus cost of goods sold (COGS) — by sales. It should be viewed over time and relative to its peers.
That can be found under the “financials” tab on a quote page.
6. P/E Ratio
The price-to-earnings ratio, or P/E ratio, is one of the favorite metrics of JonesTrading’s O’Rourke. It is the price of the stock divided by earnings per share, which gives investors a way to see what they’re paying for each $1 on a company’s bottom line, and compare that cost over time and with a company’s peers.
To find it, click on the “profile” tab in a stock’s quote page.
7. Price-to-Sales Ratio
Price relative to sales is similar to the P/E ratio, but because it is based on the top line rather than earnings per share, the ratio can’t be influenced by a change in the number of shares outstanding from share repurchases.
The higher you go up on the income statement, the harder it is [for a company] to mess around.
8. Return on Invested Capital
Return on invested capital (ROIC) is calculated by dividing net operating profit, after tax, by invested capital.
It is a way to judge how well a company’s management allocates capital to generate a return.
This can be found under the “profile” tab on a quote page.
9. Short Interest as a Percent of Float
Short interest is a good way to gauge overall investors sentiment in a stock and is often used as a contrarian indicator.
For example, a stock with a high relative short interest ratio and that is trading close to its 52-week high may have more potential for gains than a stock with a low short interest ratio trading near its 52-week low.
This can be found under the “overview” tab.
And more…
There is a lot more on stock quote pages that can be very helpful in sizing up a company.
Other important segments include Board of Directors, Liquidity Ratios, and the “Charts” tab, which provide an easy way to gauge a stock’s performance over time and the “Financials” tab which takes a look at the income statement and balance sheet over a five-year period.