How to Evaluate Stocks

Hi friends, in this particular video we are going to understand how to evaluate the stocks. So, in this particular video we are going to provide you detail and analysis. So, in this particular video we are going to talk about 3 main points one is how company decides pricing structure of stocks, this is very important for you to understand. How company decides pricing structures of stocks, how you should be careful about while analyzing such kind of stocks. Second thing is, important points to consider while making any perception about any company because sometimes the stock value makes us some time go in a kind of confusion and we really need to know what are the important points to consider while making any perception about the company. And the third, which is very important that is, how to analyze stocks/company effectively because once you have decided to go with any company then you should be knowing about what are the check points that should be over there and what are the possible risks that you might be dealing with and that are really hidden with you. So, this, we will cover all three points one by one so, coing to the first point, which is how company decides pricing structures of stocks. So, it is an interesting point, basically, whenever a company has listed itself in stock market they are looking for some kind of investment or capital investment. So, let us understand from company point of view, because company seeks some investment so, the company target is to raise, for example, a company target is to raise 100 crore of capital from shares. So, the company has listed itself in share market. Now the company has 2 options: Selling out 10 crores shares at the price of Rs 20 per share or other one is – 40 crores shares at a price of Rs 5 per share. Now, if you see all the facts the company has really achieved its target but at the real view or has the company been really providing something extraordinary? For example, if you see here you might have some perception that..this company is having more share value than this 20Rs per share and second option says 5 Rs per share so you might be going for 20 Rs per share but it is a wrong perception, the company is ultimately going to achieve this target and in order to achieve this target it’s going to take either 1 option or 2nd option. So, now we’ll be confused or now we’ll be generalizing this thing that if stock market value or you can say this value is more and you’re going to invest or we are going to take yourself with this. So, always, you should always be aware about this company strategy and how the company is the market, in the stock market. So, coming to the next point which is about how you can consider while the company, while making perception about the new company. For example, if you have 10 number of companies and you want to choose which one is best we should be going forward to or which one has got something that let us have our investment return or all investment returns. So, now the criteria..though the most important criteria to check this thing is profit per earning which is P/E ratio so, sorry.. this is price per earnings so we are going to get this checked by price per earnings. So, what is price per earnings? This is a valuation ratio of a company’s current share price compared to its per-share earnings. So, let’s explain it with an example, for example, if a company is starting trading at Rs 43 a share and earnings over the last 12 months have been rate Rs 1.95 per share, so the profit P/E ratio for the stock value would be 22.05 which is ratio of this trading value as well as this earning value. So, here you would be able to find out profit per earning. Now, this is very important criteria. once the profit per earning, better the company is having or let’s say information is having better profit per earning before you are going to get in a safe investment. So, whenever you are having any perception, basically this is perception, about very particular company while we are going to trade with that you should always be careful about how are you going to judge them and you should always be judging them with their profit per earning that is one of the very important point how you are going to judge any of the company while it is worth your investment or not. What’s the past performance that defines trade value which is going to have right now. So, never make any wrong perception with the trade value of the company as the moment just check this thing price per earning you just going to make you show about your investment. And the 3rd and most important part which is how to analyze the company effectively and avoid risks. Here, we are going to explain some basic but most important check points that you should be taking care of while analyzing any of the company because.. first you had just learnt already in the last slide. Profit per earning is the main criteria that you are going to evaluate with but for example, you have just taken 10 companies of which profit per earning isn’t that favorable condition then you might be considering to invest herein..out of these 10 companies. So, now what should be the main checkpoints with the basic analysis? The 1st one is, how well is the company doing? Now, you really need to get more info about the company how it’s doing whether it’s getting profit over the last 12mos. 2yrs, whether it’s gaining or what’s growth and how it is going to achieve that future market. All, this thing you really need to know about how the company is doing, how the, products of the company are performing in the market. The 2nd thing is, what is the financial position of the company? Because this is one of the very important part that decides your investments or whether you are going to get good return or you are you are going to get it in negative manner. Because for the last 5 for how many years has a company been able to make significant profit. This is again, which is main to the first point Now, once the profit is more and more with the company obviously it’s going to have more share value but apart from that it’s going to have it’s their own investment, their own capital because they are having significant profits and if they are having significant profits then of course, they are going to give you back better returns from the investment that you have made. Now, let us take an example of any company, for example, let us say this is a steel company if the, if we consider about it’s last 5yr performance, now we really need to think about what are the, what has been the trend of that company profit whether that has a company profit is increasing or declining or how it has been. The 2nd thing you really need to consider is what the capital investment the company’s having? Or What are future products that it might you having what is the future of the company? How the, how the products might be performing in near future. So, that’s really one of the very important part, this particular part. Now the 3rd thing is, what is the kind of appreciation that past investors in the company’s stock have got? Again, this is really directly related to your decision of investment because whatever that kind of result and the past performance has been. That might be same scenario with you. Now, you really need to think about factors what has been behind the stocks results but you really need to find out this history this really going to help you. And the last very important part is, if the company offering any sort of dividends? Yes, if the company is offering or not, That is really one of very important part. So, these are the basic and most important checkpoints that you must be analyzing before you’re going to a new company or making a perception about particular company because if you checked these four main points then you can be, you can say that you have done good analysis about a particular company. And if you have done this 4 basic parts analysis and you can say that we have able to analysis then you can go for the safe investment. So, these are the 4 safe points. So, to summarize the, this video, would to again talk about what we have learned in here. We have learned here what is the pricing structure of the stocks, how the pricing, company decides which pricing structure and how this should be making the perception, that’s really important to find. Second thing is, we really, we learned, we recently learned about important points to consider while taking any perception about particular company but this methodology to make the perception about the company’s stock analysis and so stock market results. Third thing that we just learnt about analyzing stock companies effectively as well as avoiding risks while doing any investment. So, see you in the next video and we hope that this video has been helpful for you, okay thank you, buh-bye.