5 Ways to Analyze Stocks and Become Your Own Stock Analyst

Author: George Davis

How to analyze stocks by yourself before investing in them

Investors generally work with stock analysts to find stocks that are potentially profitable in the long run. There are several ways stock analysts work to analyze stocks, including fundamental and technical analysis of a stock. If you want to save money and don't want to enlist a stock analyst's help, you have come to the right place. We will share the different ways you can analyze the stock and become your own stock analyst right here.

Most investors rely on the recommendations of financial experts and stock analysts before they invest in a stock. When you know how to analyze a stock, you won't need a professionals' expertise since you will manage to perform stock analysis on your own. We will discuss the common methods to analyze a stock, including examining a company's book value, earnings per share, price-to-earnings ratio, and return on equity. The stock analysis method you choose to implement will depend on your preference. Here are five ways you can analyze the stock and become your own stock analyst.

1. P/E Ratio

Studying the price-to-earnings ratio of a stock is one of the best ways to analyze its performance. The P/E ratio can be calculated by dividing the stock's earnings per share by its market value per share. The stock's value will be determined by comparing the stock's P/E ratio with the industry standards and competitors. As an investor, you want to invest in a stock with a lower P/E ratio.

2. Earnings Per Share

The earnings per share of a company show the efficiency with which its revenue flows back to investors. A higher EPS means the company is profitable and is an excellent sign for investors. The higher the EPS of the company, the more the shares will be worth. That is because investors want to buy a company's stock when the earnings are higher.

3. PEG Ratio

The PEG ratio or price-to-earnings-growth ratio is designed to consider a company's growth. You must divide the 12-month growth rate by the P/E ratio to get the PEG ratio of the company. That allows you to look at the historical growth rate of the company and estimate the future growth rate. A stock is considered valuable by investors if the PEG ratio is less than 1.

4. Book Value

Another stock analysis method to determine the value of a company's stock is to determine the price-to-book ratio. Investors use this method for high-growth companies, which have been undervalued. To find the P/B ratio, you must divide the stock market price from the book value of the equity. The book value of the equity can be found by subtracting the book value of assets from the book value of liabilities. A lower P/B ratio is seen by investors as a sign that the stock is undervalued.

5. Return on Equity

The return on equity is used by investors to analyze whether a company offers positive returns to shareholders. When you analyze the ROE, you can find profitable companies easily. You can calculate the ROE by dividing the average equity of shareholders from the net income. An ROE that shows consistent growth is an excellent sign that the company is profitable.


These were all the different ways you can analyze stocks and become your own stock analyst. As an investor, you want to give yourself the best chance to invest in profitable and valuable stocks. When you become good at analyzing a stock, you become a better investor.

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