Reams of information is available on the internet relating to most companies. Articles are written about the top 20 FTSE risers, overviews of the FTSE 100 by Index, Price Share, Share Performance and so it goes on. This is a great way to get used to carrying out your basic calculations and identifying the companies worthy of consideration.
Early every morning, like clockwork, companies release their reports to the London Stock Exchange website, and if you know what you are looking for, these reports are invaluable.
Top investment companies provide information on various companies, via their websites, free to everyone.
Use all of this free information to gain your initial feel for the stock-market in general.
Company Performance
A higher Gross profit margin indicates the efficient production of a company’s product. This is calculated using the income from selling the goods, less the cost of the goods sold (COGS).
Company Net Debt / EBITA / COGS
This shows you, should all the company’s outstanding payments be called in, whether they could pay everything and how much they would be left with.
Whilst the Net Income identifies the overall profitability of a company, EBITA (Earnings Before Interest, Taxes and Amortisation) is a more accurate reflection of Operating Profitability. These figures are used to identify a company’s creditworthiness by lenders.
The EBITA figure is the calculation of Total Revenue MINUS Cost of Goods Sold (COGS) which is the direct cost of producing the goods sold by the company.
Again, retrospective calculations will tell you a lot about companies and the information is all available on the Internet. Upward and downward directions are self-indicative
Earnings per Share
The wide definition of Earnings per Share (EPS) or net income per share is the company’s total net income for the whole of the previous year divided by the total number of outstanding shares. These outstanding shares are calculated as the number of issued shares minus the number of shares available in the company’s treasury. This base information is widely available on the Internet, for your own calculations.
By retrospectively comparing these annual results, it is easy to ascertain the direction in which the company is heading and whether they are worthy of your consideration.
If you don’t feel like doing the sums yourself, as we said before, all information is available on the internet in one form or another.
Dividends
Some companies do not issue dividends, opting instead to re-invest in their company. However, many do and this again is a good way to follow the movements within a company.
Check the retrospective dividend payments and the net income for each year to gain a pattern for that company.
Remember
Research and more research before you make any decisions. Look at the company’s past performance at the same time each year, as well as just the current year.