How to decide which company (stock) is worth looking at for investing Lesson103

  The information that is needed to evaluate any company's stock, is available online for free. Free means that extra work may be needed by you to get the answers you need. For those that are starting out in learning about stock research, you don't need to spend any money to pay for a full service research company. I find that if you spend extra time doing the work, with extra effort, you will retain what you learn better.

  The first thing I like to look at is companies that do the same type of service or create the same product. My example of this is Home Depot, and Lowe's. Both of these companies provide tools, paint, sheet rock, and lumber. The question here is which of these two is the best? Another example is CVS, Rite Aid, and Walgreens. These three provide similar services and products. These three have flowers, drugs, and over the counter medicines. The question again is, which of these three is the best?

  A quick and easy check is looking at how the company manages its money. For this we look at its "ROIC", Return On Investment Capital. This number is important because we need to see if money is being made by the company, or is the company losing money trying to do what it does.

  The company spends money to operate. Equipment to be maintained and replaced, supplies, electricity, gas, license, permits, insurance, advertising, employees pay, and other miscellaneous items all cost money. The question is, after all these expenses are paid at the end of the year, how much money does the company have, and how fast is this earned money growing?

  For example; if it took $100,000 to operate the company for the year, and after all bills are paid for the year, this company has made $10,000. The ROIC growth rate in this example is 10% ($10,000 is 10% of $100,000). We always want to see 10% growth rate or greater. If you know nothing else about this company, at least you know that management knows how to properly use money in a manner that won't cause bankruptcy.

  From this one quick check we can learn that sales/revenue, the total dollars the business took in from selling its products, is at a rate to allow financial growth. Because of this the EPS (earnings per share), which tells us how much the business is profiting per share of ownership, can be expected to be growing.

  This one quick check saves you lots of time researching a company, and keeps you from doing alot of work needlessly. ROIC gives us the answer we need quickly and tells us that continued research is worth our time or not. There is more research required of any company we are thinking of investing in, but ROIC is always the starting point.

  For more information on learning how to pick quality stocks, see our site at http://www.youcontrolinvesting.com/ and learn how easy it is to be a successful investor. This is the perfect time to make your move.