How to Spot a Good Investment Stock

• 1). Research management performance objectives.Do a little digging to find out if a company’s management team has consistently met their own past performance objectives. Have their predictions matched the actual company performance over the years?How a company is run is a good indicator of its market value for years to come.
  
  
• 2). Calculate the company's market cap.In other words, how much would it cost to buy the company outright? This is called the company’s market cap. Knowing a company’s worth is one way of avoiding paying too much for a share of its stock.To figure out a company’s worth just take the number of outstanding shares (shares for sale) and multiply it by the quoted price per share. This will tell you how much it would cost to buy the company outright. At this point you’ll want to compare market caps across different company portfolios to make sure the price tag you’re looking at is based on solid company practices, and not a volatile marketplace position.
  
  
• 3
  Time Is Money
  
  Look for a positive cash flow.Take a look at the company’s financial statements (income statement, balance sheet and cash-flow statement). Is it showing a profit? How much debt is the company carrying?Knowledge of the facts is what a company’s financial information will give you. Sometimes, what looks good on the outside can look pretty shabby on the inside. Always check the numbers.
  
  
• 4). Check the company's market standing.A well established company will have a competitive advantage in the marketplace. Other companies, or start-up companies generally have a hard time accumulating a substantial market share when competing against an established company.A company’s competitive advantage can be its brand name, or it can rest in its having already come up with the start-up capital required to launch the business (i.e. heavy manufacturing, or the commercial construction sector). A company’s reputation in the marketplace can be a strong competitive advantage as well.Identifying well established companies that have been in the business for a while is a solid approach towards finding good investment options.
  
  
• 5
  Eying The Process
  
  Look into the company's share management practices.Companies with fewer outstanding shares are generally more stable than those with a substantial number of shares for sale. The share value is stronger, and the shareholders have a larger stake in the company.By keeping the number of outstanding shares low, a company is in a better position to create large returns for its investors.