3 Key Factors for a Business Valuation – Stocks
Investing in Stocks can be a healthy one for Few People. For some, it can be a worrying moment. In any case, Investing in equity is just adding Wealth Creation for the Family.
Small or Retail Investors may not be able to run a company like Listed Companies. They may not have the strength to manage it. But the few stocks in a listed company will also prosper in the Long run.
The Main advantage of Small or Retail investors is that they can find good equity stocks and get the benefit of Compounding in the Long term. So, we are no need to do Big things, Invest in stocks what we know and find. Let that Company take care of its Corporate Growth.
While there are several factors to analyze and find a good equity. Here are 3 Basic and Key factors that can be applied to any Business. Investors should therefore consider these three factors as a model for Business or Stock Valuation.
- Management & Corporate Governance
- Financial Statements
The role of a Founder is very important for any company, whether listed or unlisted. The Founder should take care about the Company. He or She should conduct their company fairly and to protect the basic rights of Employees and Shareholders of the Company.
Similarly, the Promoter’s Holding on Shares represents the confidence of the Company. The Second important thing is that the Management of the Company should handle it properly. The Efficiency of the Employees of the Particular company and the value they receive through it can benefit the Investors. The Employees and the Management are the key people to promote the value of the Company. It should also ensure that it is good at Products & its Customers.
It is imperative that the Company is concerned with the Welfare of Employees and Shareholders. While ignoring them, it can cause a change in the growth of the Company and then it is in the Share Price.
The Third one is, it is necessary to keep a close watch on the Company’s Financial Statements – Profit & Loss, Balance Sheet and Cash Flow. It is important to note how the company’s Sales growth is shown in Profitability. Find out whether the Company’s earnings will support for the Future growth. We also need to look at whether the Profitability of the Company’s said in the Annual or Quarterly results is really benefit to the Investors.
Generally, the Profit of the Company is revealed in the form of Stock Price, Dividends, Bonus or Buyback that investors may receive. So, we cannot avoid these 3 things before buying a Stock based on Fundamental Analysis.
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