10 Key Things to Look For When Analyzing Stock Market Performance

There are many metrics available to assist you as you endeavor to determine what stock investment is a good fit for your portfolio. One obvious criterion is to buy at a lower price than the price will be in the future, but how do you consistently do that?

After the fact, it may seem obvious that a certain stock was a winner, but if you jump in too late, you end up “chasing the market” and lose a lot of value you could have gained or perhaps end up on the downside. Spinnaker Investment Group suggests familiarizing yourself with some of these analytic tools as you explore investment options:


Generally, consistent growth is a good sign the business is healthy, although accounting practices can reduce reported earnings.

Earnings per share

Calculated by dividing net income by the total number of outstanding shares, it offers a window to the profitability of the company. Some prefer using a weighted ratio of net income minus total dividends for a more accurate picture before investing.

Price to earnings ratio

Typically calculated after yearly financials are made available, price to earnings is the market value price per share divided by earnings per share.

Price to earnings growth ratio

For further analysis, the price to earnings ratio can be divided by the growth rate of its earnings for a specified period of time.

Book value

Essentially, this is the accounting value of the company on the balance sheet and can be useful when compared to the company’s market value to determine if the stock is over- or undervalued.

Free cash flow

This the cash left over after a company pays its operating expenses plus capital expenditures and reflects how efficient a company is with cash and the potential to pay dividends or perhaps buy back stock.

Return on equity

This is a profitability measure calculated by dividing net income by the shareholder’s equity. In essence, how good is the company at using the stockholder’s money to generate net income?

Return on assets

Similarly, this calculation indicates how efficient a company is at using its assets to generate a profit. The formula is net income divided by average total assets.

Net margins

By dividing net income by sales, you can determine how efficiently a company is creating profit. The nature of certain businesses requires a significantly greater volume of revenue to show profit and consequently can be expected to have relatively low net margins as compared to other types of businesses.

Consult a reputable financial investment group. None of these measures of a company’s value is in itself conclusive. Even a positive sign from the majority of these or many other indicators must be weighed against other companies in the same industry and competitors.

The numerous factors that go into selecting the right stock to invest require a thorough knowledge of not only the market but also the individual investor’s needs, goals and risk tolerance. Spinnaker Finance provides a unique approach for every individual investor. Connect with us today.


The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.

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