Investing in stock market is a long term process. You should wait with patience to yield good returns from the stocks. However, selecting a good stock for investing is a difficult process. This is the important key for your successful investment in stocks. Many experts and websites provide different stocks based on their analysis and this will create some confusion to the investors in selecting the good stocks from these sources. Every new investor should know some minimum knowledge about the stock selection procedure and the parameters we should apply in filtering the good stocks. This self analysis process would help you in finding the good stocks to proceed for investment. What are the parameters we should know for filtering the stocks which are fundamentally strong?
Parameters We Should Know for Fundamentally Strong Stocks:
A strong stock fundamentally is one with good valuations and strong future earnings. We need to do little homework in finding the strong stocks. There are some standard indicators or parameters that commonly used to assess the company fundamentals. These include:1. PEG Ratio:
The PEG Ratio is one of the effective parameter in analyzing the stock fundamentals. The PEG ratio is the earnings divided by the five-year earnings growth rate. For example, a company that has a P/E ratio of 10 and a five-year growth rate of 40%, would have a PEG ratio of 0.25. Thumb rule says, a PEG ratio of one or lower is considered to be an undervalued stock and likely a good buy. We should not buy the stocks having PEG ratio greater than 2 or less than 0 (i.e. negative PEG). Growth stocks with a PEG of one or lower can help investors spot the best investment opportunities in those stocks.2. PBV Value:
The Price to Book value or simply PBV is also another important factor in deciding the fundamental strength of a stock. Price to Book Value is one of the most useful ratios you can use when buying or selling company shares. The Book Value Per Share is also known as the Net Asset Value per share and usually abbreviated to NAV. It is the total asset value of a company less it’s total liabilities, divided by the number of shares the company has. A PBV ratio of 1 means that I am paying a price for the shares which is exactly equal to the net asset value of the shares. On a thumb rule, if the PBV value of a stock is less than 3 means the stock is under valued and good buy bet. Ideally we can consider the PBV value up to 5. If the PBV is greater than 5 means that stock is expensive to buy and better avoid for investment.3. P/E Ratio:
The price-to-earnings ratio, or P/E is the most widely used stock analysis method. This method has been used for ages by analysts and still remains one of the most relevant procedure for stock valuation. A simple P/E ratio can reveal the stock's real market value and how the valuation compares to its industry group or a benchmark like the S&P 500 Index. By knowing mere the P/E ratio of a company, we cannot judge the stock strength. However, we need to compare the company's P/E ratio with the industry's P/E ratio. Lower P/E ratio means company is undervalued and can be bought at current levels and vice versa. Some analysts even compare the current P/E to a company's historical P/E, investors could determine if the stock is trading higher or lower compared to the past. If the stock is at the higher end of its range, the likelihood of the stock being overvalued is much greater, whereas, if the stock has a P/E at the lower end of its range, then there is a greater likelihood of it being undervalued.4. EPS Value:
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares
Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of the year. Higher earnings per share is always better than a lower ratio because this means the company is more profitable and the company has more profits to distribute to its shareholders. Although many investors don't pay much attention to the EPS, a higher earnings per share ratio often makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to look at it but don't let it influence their decisions drastically.
Hello Ravi,
ReplyDeleteExcellent Analysis.
Can you please post for technical analysis and best time to buy stocks.
I need to learn more about fundamental Analysis and technical analysis.
Please contact me on
Falgun8812@gmail.com
+91 9662219807
Thanks Falgun for your comments. I will try to publish some posts on Fundamental Analysis and Technical Analysis in the coming days.
DeleteHi Ravi,
ReplyDeleteYour stock given superb return. You pick up hidden germs.
Today, i see your sort listed stocks.
can you suggest me multibagger stocks for 2017.
My email : jatinpatel001@gmail.com
Dear Jatin, thanks for your comments. I will keep on update on this blog, whenever I found any good stocks. However, you can also read my post: My Strtong Stock Recommendations for 2017. You can invest systematically into these stocks to see good returns.
DeleteHello, Ravi
ReplyDeleteWhich is the best stock among your recommendation?
All the recommended stocks above are good for long term investments. You can invest systematically into all these stocks every month. Over a period of time (2 - 3 years), you will yield good returns. United Drilling Tools is having promising future.
DeleteHello Ravi,
ReplyDeleteAs per recommended parameter, Sasken Technologies is good for invest?
IT sector is not promising. We need to wait for some more time to comment on IT stocks.
DeleteHello Ravi,
ReplyDeleteI have bought Infinite Computer Solutions India @ 165.
Please advise me , it is preferable to hold it or not.
Jatin, Infinite Computer Solutions having good fundamentals. However, IT sector is not promising sector now. Some corrections are happening in IT sector. We need to wait for some more time to comment on IT sector
DeleteRavi Kumar good work for investment.I like it.what's your opinion for aban offshore?
ReplyDeleteABAN Offshore is not having good fundamentals. Please avoid for now.
DeleteHi Ravi,
ReplyDeleteNeed your advise, I bought sun pharma in Dec 2016 @740.
Currently trading at 640,how long should I hold it?
Thanks for your time.
This comment has been removed by the author.
ReplyDeleteAs per your recommendation, bought Shalibhadra Finance @ 88.
ReplyDeleteJatin....Shalibhadra Finance is a good stock for long term. Also, try to buy IST Ltd and United Driliing tools on every market dip and keep for long term i.e. more than 3 yrs. These 2 stocks are Multi-bagger stocks and will yield good results.
DeleteSir Please Post How to find stock
ReplyDeleteSure Sanjeev. I will post in the coming days.
ReplyDeleteHi Ravi,
ReplyDeleteCan we enter now in United drilling and IST. Actually i am long term investor give me some stocks for 3 to 4 years range.
Dear Saipavan, yes you can enter now also into United Drilling and IST. As Markets are in correction mode, you can buy in small quantities on every market dip and hold for long term. You can also invest in Trigyn Technologies. This is also a good stock in the near long term.
ReplyDeleteWhat is your c view on shree renuka sugar
ReplyDeleteAvoid sugar sector stocks. I have done fundamental analysis on Renuka sugars and it is not the right time to buy. Also, promotors of Renuka Sugars pledged 47.84% of their holdings.
DeleteHi Ravi,
ReplyDeleteExcellent analysis.
Could you kindly suggest your current top 5 stocks, which are fundamentally strong and are good to invest from now, for long term (1 - 3 years)?
Thanks!
Thank you for your comments. Please read my another post: 'My Strong Stock Recommendations for Year 2017'. These stocks are good for short to medium term.
Deletebut not best tock volume very low
ReplyDeleteThe stocks I have selected are based on Fundamental and Technical Analysis only. These are long term stocks hence volumes are not that much important. But, you do your own analysis and take a decision.
DeleteHello Ravi,
ReplyDeleteI was planning to do a SIP for 1 or 2 stocks montly - Was planning to pick SBIN or HDFC Bank - can u shed some loght on the same
Hi sir, I am new in this market. I am interested in long term multi bagger.stocks. How can I be benefitted from you.
ReplyDeleteThanking you.
Manabendra Biswas
From WB
Dear Manabendra...I need your full details like your financial goals, Risk appetite, time period, Insurance need etc. Then only I can suggest you a planning for your long term. You can reach me on: ravikumarnama@gmail.com
DeleteKindly, suggest which stocks is better to invest in this current situation.
ReplyDeleteJatin, Pls check my latest post : http://www.myinvestmentspub.com/2017/08/my-strong-stock-recommendations-for.html
ReplyDeleteAs per your recommendation, bought Trigyn Technologies @ 98. I want to buy another stock United Drilling Tools but afraid of its volume. Also,trades in Z group.
ReplyDeleteIf you want to buy another stock, you can buy Maan Alluminum now for a target of 195 in 6months to 1 year time frame.
DeleteThanks for suggest another stock. I bought Maan Aluminium @ 149.50.
ReplyDeleteI bought Repco Home Finance @ 871. Kindly, guide me.
Sir, is it advisable to invest power sector stocks? if you are positive then suggest me good one.
Maan Aluminium target is 200. I checked the fundamentals of Repco Home Finance, but the recommended buying price is 520-540. You have bought at expensive price. Its Price to Book value is high now. It is recommendable only when it comes to 520-540 range.
DeleteThank for valuable advice. Kindly suggest in Shalibhadra Finance, It is consolidated on @95 to 97 and Trigyn Technologies 106 to 109.
ReplyDeleteIs it expected big correction in market?
Dear Jatin, I am also observing Shalibhadra Finance, Trigyn Technologies and United Drilling Tools are not moving as expected. However, the fundamentals of these companies are still strong and promising. Hence I am still stick to 'Buy on Dips' for these stocks. Take your own decision.
DeleteDear Ravi, I had bought Akshar Chemical @ 750. It is 100 rupees discounted in two days. Wha is the reason behind sliding this stock ?
ReplyDeleteJatin...I have checked the fundamentals of the stock, still showing strong. Hence, I prefer to hold the stock. As I mentioned in my earlier mails, this is long term stock.
DeleteDear Ravi, Shalibhadra Finance is nicely move.
ReplyDeleteDear Ravi, What is expected price of Shalibhadra finance ?
ReplyDeleteJatin.... if you want you can exit Shalibhadra Finance at 150...
ReplyDeleteI want your help. I bought Steel Exchange of India @ 132.80 for intra-day session but suddenly drop down and closes @ 104.25 at seller circuit. Today, it is traded on @83.40 at seller circuit. At this time, I am facing more than 10,000 losses.
ReplyDeleteKindly, guide me in this stock. It is my humble request to suggest good stock which one is cover up my loss.
Jatin, many fraudsters are giving SMS messages to buy the weak stocks to increase the stock price artificially. Do not believe those fraud SMSes and loose your money. Do some fundamental analysis and find good stocks. Invest in small amount systematically and wait for long term.
ReplyDeleteI want a stock for short time. which stock I can choose
ReplyDelete