Sr.

No. What Why

1
One-year Price chart with 50-day
moving average
Buying a stock while its in a downtrend is dangerous, as it will
likely move lower. A stock is in a downtrend if its price is below its
MA, and in an uptrend if above. Use the 50-day MA.
2 Price/Sales ratio (P/S)
Valuation check. A stock with a P/S above 10 is momentum
priced.
Buying momentum priced stocks is only recommended in a strong
market.
3 Cash Flow per share
Companies with positive operating cash flow are safer investments
than cash burners (negative cash flow).
4 Average Daily Volume (shares)
Institutional buying is an important catalyst for stock price growth.
Institutions buy hundreds of thousands of shares and prefer stocks
with large daily trading volumes so they can easily move in and out
of positions.
5 Financial Health Grade Invest, dont gamble! Stick with companies with solid financials.
6 Growth Grade
Consistent strong sales growth over extended periods translates to
long-term stock price appreciation.
7 Institutional Ownership
Lack of institutional ownership means mutual funds, pension plans
and other institutional buyers dont think they will make money
owning the stock. Why would you want to own it?
8
Number of Analysts Making
Buy/Hold/Sell Recommendations
A companys performance can go unrewarded if nobody knows
about it.
Sufficient analyst coverage is necessary to create investor interest,
especially from institutions.
9 Gross Margin Trend
Changes in gross margin percentages from quarter to quarter
point to changes in a companys competitive position in its
marketplace.
Increasing gross margins signal an improving competitive position,
and declining margins warn of increasing competition.
10
Revenue Growth Rate
Latest Quarter compared to year-
ago quarter
Slowing revenue (sales) growth is an important red flag signaling
danger ahead.
11 Forecast Revenue Growth Rate
Look at consensus revenue forecasts to determine if historical
growth rates are expected to continue.
Advanced Research & Analysis - Calculater Required
Stock Analysis Checklist
12
Accounts Receivables Growth vs.
Sales Growth
Accounts receivables are monies owed by a companys customers
for goods received.
The Accounts Receivables Ratio (ratio) is the net receivables
divided by the revenue for the same quarter.
A significantly higher ratio vs. year-ago is a red flag pointing to
future problems.
Action
O.K. to buy if stock price is above its 50-day moving average.
O.K. to buy if P/S is less than 10. P/S ratios between 3 and 5 are
best for growth stocks.
Ratios below 2 reflect value priced stocks.
O.K. to buy if Cash Flow per share is a positive number.
O.K. to buy if Average Daily Volume is 100,000 shares or higher
(0.1 mil), and above one million shares is best.
O.K. to buy if Financial Health Grade = A, B or C
O.K. to buy if Growth Grade = A or B
O.K. to buy if institutions own at least 30% of shares outstanding.
O.K. to buy if a total of at least four analysts are listed as currently
making strong buy, buy, hold, underperform, or sell
recommendations.
Look only at the total number of analysts making recommendations,
not whether there are more buys than holds, etc.
Gross margin (GM) is the "Gross Profit" divided by "Total Revenue,"
expressed as a percentage.
Calculate the GM for each of the past five quarters, and observe the
GM trend.
O.K. to buy if the trend is flat or increasing. Ignore variations of less
than 1%, e.g. from 41% to 40.5%.
Use your calculator to compute the most recent quarters (MRQ)
revenue growth rate (percentage) vs. the year-ago quarter.
Compare that figure to the 1 Year sales growth listed in the
Growth Rate section.
Ideally, the MRQ growth should exceed the 1-year figure, signaling
accelerating growth. But, it's O.K. to buy if MRQ growth is at least
85 % of 1-Year growth.
Check the forecast revenue growth percentage for the current
quarter vs. the corresponding year-ago quarter.
Ideally, the growth rate should be accelerating but it's O.K. to buy if
the forecast year-over-year revenue growth is at least 80% of the 1-
Year growth from the previous step.
Advanced Research & Analysis - Calculater Required
Stock Analysis Checklist
Compute the ratio for the most recent and the year-ago quarters.
Ideally the most recent ratio would be less than year-ago, but it's
O.K. to buy if the ratio is the same or lower than year-ago. Ignore
increases that are less than 5%, e.g. from 60% to 64%.