Have you ever wondered what you must factor in when selecting company to invest in? These are the 4 factors you should focus on.
The most important tenet will be the quality of Business while Valuation stands at least important. Although quality is the most crucial point, this can be quite intangible. Hence, we must also look at the Financials and Valuation for a more tangible gauge of the company’s prospects.
What is Valuation?
Valuation is a method of determining the true or intrinsic value of the stock, whereby it is assumed that the actual price of the stock will not match its intrinsic value. Valuation is then a benchmark to see if you are over or under-paying for a stock.
The most common method of valuation will be the Price-To-Earnings (P/E) ratio[1] method.
However, it is not the determinant of whether you should buy the stock. Instead, it should be used as a...