How do I know if it's a good company to start investing in?

May 30, 2025 7:35 am

Dear ,

Look at both fundamentals and basic technical indicators before investing.

Fundamentals:

Cash Flow is King: Even profitable companies can struggle if they mismanage cash. Review cash flow statements—healthy cash flow is a strong sign of a well-run business.
Profitability Metrics: OPM% & ROE :Operating Profit Margin (OPM%) shows how efficiently the company runs. Return on Equity (ROE) tells how well it uses shareholder money.
High values in both usually indicate a solid long-term business.
Growth: Look for companies growing at least 3–5% above inflation with healthy future projections. Consistent growth is a key driver of stock value.
Valuation: Great companies can trade at a premium, but avoid excessive overvaluation. Use metrics like P/E ratio and Price-to-Book to assess whether the stock is reasonably priced.

Basic Technical Analysis:

The stock should be trading above its 50-day and 200-day moving averages.
The 50-day MA should be above the 200-day MA, indicating bullish momentum.
Manage risk: Set a stop-loss below recent support levels, or use a 10–20% max loss rule on your investment.