Step 4: Look into specific companies
Your basic checklist
Once you have chosen a few companies you’d like to learn more about, go to their corporate websites and look at their annual and quarterly reports. These reports give investors an insight into the goings-on of the business, as well as financial reports that contain important information about the company’s financial position.
Remember, when it comes to researching companies and their stocks, there is no limit to how detailed you can be. Companies that trade on a stock exchange like Bursa Malaysia are required to make their business information public for investors like you to look at, and the Securities Commission of Malaysia is there to ensure that these companies are transparent and truthful in providing such information. All the information is available on Bursa, and on the company’s website. These are some of the basic questions that you should know the answers to.
- Is the company part of a growing industry?
- Has the company been around for a while and does it have a track record of good performance?
- Does the company have a history of being run well? Is the Management Team strong?
- Are the economics of the business favourable? Do you believe in the company’s business model?
Take a look at the numbers
Once you’ve covered the basic questions above, you can then dive in deeper by examining the company’s financial statements and looking at important accounting indicators.
When you take a few of these metrics and measure them up against one another as well as compare them against other companies in the same industry, you might get a clearer picture of the company.
Here are some basic terms that you’ll often see on financial websites:
Financial metrics – Compare these numbers across similar companies to give you an indication of how well a particular company is doing.
- Revenue Growth
- Profit Growth
- Return of Equity
- Dividend per share
Valuation metrics – Compare these numbers across similar companies as well as the industry averages over a long period to give you an indication of how expensive a particular company is trading for.
- P/E multiples