Thursday, 26 November 2009

Things to research before buying a share

Before buying a company's share following things have to be thoroughly investigated about any listed company.

Companies which manufacture same products come under common sector.For example, Tatapower and National hydroelectric power belong to the same sector.Before buying shares of these companies, we should be able to estimate their performance in the future.That depends on various factors like government policies,their product demand influences the company performance.

Corporate estimate:
A good amount of study on the future development plans of the company and its performance in last three to five years is required.We need to inquire about its management,present activities,growth opportunities and market competency.

Financial estimate:
When the above things are fine,then we need to further dig deep into their financial strength.We have to estimate whether buying the share for current price is good or not.To get to this estimate,we need to look for EPS(Earnings per share) and Price to Earnings ratio (P/E) and company's equity capacity.With the help of these,we can estimate the future price value of its share.
To do a financial study we need to understand companies financial results for every year. continue...

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