This article will tell you that the right time to invest in stock market and which are the good stocks for investment or how investing in good companies.
What is the right time to invest?
The correct answer is that there is no right time to invest. Important - There is right stock to invest and there is no right time to invest. One should look for right stock to invest and not right time to invest. So the conclusion is there is no right time to invest but in fact one should look for right stock to invest.
What do you mean by right stock?
There is no exact definition for right stock. The undervalued stocks would be called as undervalued stocks. Investing in companies whose stock prices are currently undervalued but the company has good growth potential in future would be called as investing in undervalued stocks.
Following are couple of ratios to find undervalued stocks but to take decisions for investment further analysis is important and these ratios don’t provide all information.
Low PE ratio -
PE ratio is one of the most important ratio on which most of the traders and investors keep watch. The PE ratio tells you whether the stock’s price is high or low relative to its earnings. The high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. but, the P/E ratio doesn’t tell us the whole story of the company. It’s more useful to compare the P/E ratios of one company to other companies in the same sector/industry and not in different sectors. PE ratio of less then 10 is generally considered as undervalued provided it has future growth potential.
And in some scenarios PE of 10 to 15 can also be considered provided the company has high growth performance in past and expecting same in future. Generally stocks bought below 10 and kept invested for long term given more great returns.
Low Price to Book Value (PB)-
Basically PB ratio is mostly utilized by value investors to find real wealth when the stocks are at their lower prices. So investing in stocks having low PB ratio is to identify potential candidates for future growth. A lower P/B ratio could mean that the stock is undervalued.
Book value - It is the total value of the company’s assets that share holders would receive if a company closed down. Like the PE, the lower the PB, the better the value of the stock for future growth. Some of the investors become quite wealthy by holding stocks for the long term of such companies whose growth is based on their businesses instead of market and one day when every one notices this stock the value investor’s pockets are full of Most of the analyst considers this ratio best to work under 1. If the stock’s price to book value is below 1 then it is considered as undervalued.
Earning Per share -
EPS shows how the company is profitable and growing. EPS of a company should keep increasing year after year. So the conclusion is to have a look for the past 4 to 5 years EPS and check the consistent incremental growth in the ratio.
For more details on fundamental ratios please visit at Fundamental Good Stocks
http://www.daytradingshares.com/growth_under_valued_stocks.html
Above three are most widely used ratios but decision based on only above is not advisable.
So if you are looking for tips to invest in undervalued stocks then please visit above mentioned website.
Day Trading Shares
Website for Indian share market, day trading, delivery trading, online share trading, technical analysis, mutual fund and free daily tips nse bse, latest updates on share market news.
| By Sachu Shethi Published: 4/18/2008 |
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This post was written by admin on February 15, 2009
