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How To Analyse Shares Before Investment ?

How To analyse Stock Market Before Investment?, how to analyse stock market, tips for share market investment, astrologer for best horoscope analysis for investment.
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How to analyse shares before investment? A very important question for an investor if he is ready to invest in shares. If you are an investor and you have decided to invest in any company but you haven’t analyse the company then STOP. 

Ask Some Questions Before Investment?

1. Are you investing in excitement?

2. Are you investing in any pressure?

3. Has anyone making special effort to invest in any company?

4. Have you analyse the company profile and market value properly?

5. Have you decided the time of your investment?

If you have proper answers of the above questions then you can invest. Other wise there is very chance to not get the satisfactory result from your investment. 

Here in this article we will see that how to analyse the shares or any company before investment which is a very important part for any investor.

1. How to Check the Book Value of shares of any Company?

‘Book Value’ is the value of shares present in the accounts of Company. This is the value which company has decided as per their analysis. 

The formula to check the book value of share is given below-

Book Value of a Share = Share Holder Funds/ Total Equity shares of a Company

To Know the Share Holder fund you can add Company Reserve And Equity Capital.

2.  Know the Reserve and Plough back Fund of Company-

Plough back Fund is a reserve part from the profit which is kept for future development of a company. Developing companies keep a good plough back fund. 

If the reserve of any company rises then it’s shares value also rise which means profit to share holders. 

 To know the reserve and plough back fund you can read business magazines and newspapers. 

3. How to Calculate Earning Per Share (EPS)?

This is very important to calculate the Earning per share before investing in any company. This helps you to know that how much you will get profit on investing. 

The formula to know Earning pr share (EPS) is –

EPS= Profit after Tax/ Total No. of Equity Shares

4. How to Calculate the Price Earning (P/E) Ratio?

P/E Ratio = Share Price/ Earning Per Share (EPS)

To understand this lets take and e.g. Suppose if you get the P/E ratio 2 that means Share prices are 2 times more than it’s income which shows that you have to take 2 years two recover your investment. 

Higher the ratio more time you will take to get back your investment, less the ratio less time you take to get your investment back.

A Very important question is it good to invest in companies having less P/E Ratio?

No, it is not always good to invest in companies having less P/E ratio because it is possible that currently the company is going well but future of the company is not strong. 

Similarly it is possible that company having more P/E ratio has good future. So don’t take decision only by seeing the P/E ratio. Analyse properly company background, future planning, reserve etc. before investing. 

4. How to know the Yield of Shares:

Yield= (Dividend per share/ price of share) x 100

By knowing the yield we can find that in future how much dividend we can get. 

5. Know The Return on Capital Employed (ROCE), Return on Net Worth (RONW) and PEG Ratio:

Very important information for a company is to know that the company in which he is going to invest is using the Loan and the amount from investors in a right way or not. 

How much company is earning from the investment. This is called return on capital. The higher the ROCE, good to invest in those companies. 

To know this there are important ways –

A) Return on Capital Employed (ROCE) – (Net Profit + Expenses of One time) – (1 time Income from both sources direct and other sources)

By this we can know how much profitable is the business of company. 

B) Return on Net worth (RONW) - 

RONW = Net Profit/Net Worth

By this we can know the expected income in future. 

C) Price per earning to growth Ratio (PEG) Ratio:

This is a very good tool to know the true value of any share. The PEG value tells us that the current price of any share is real, more or less. 

PEG = P/E ratio + Future Growth Rate. 

How to analyse shares before investment? A very important question for an investor if he is ready to invest in shares. If you are an investor and you have decided to invest in any company but you haven’t analyse the company then STOP. 

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