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Security analysis

If you want to invest in a company you should be sure that this investment should be profitable. For that we have to analyze the securities issued by the company. When we analyze a company we have a multiple perspective:
1. The security should provide regular returns.
2. The price of the shares should be increasing.
3. The risk in holding the security should be low.
4. There should not be wide fluctuations in the stock prices.
5. The security should be relatively immune to changes in the interest rate and inflation or deflation.
6. The internal operations of the firm should be reliable and steady.
7. The company should be financially strong even if external economic conditions become adverse.
8. The levels of debt the firm holds should not be too high.
9. The earnings per share should be high.
10. The financial statements of the company should be strong.
11. The auditor’s opinion should be considered.
12. Financial forecasts should be seen where available.
13. External opinion about the company must be considered.
14. The firm should provide dividend.
15. The firm should have a good market-share in the industry.

The investor may buy stock that is growing due to increasing earnings of the company. Or the investor may buy undervalued stock, for example, when a sector is out of favor temporarily. Another way to look at investment is to buy a set of stocks that represent the market.

Applying these simple steps keeps you safe in the dangerous business of the stock market.

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