In this article, I am going to share with you how I quickly decide if the stock you are looking at is worth your time to perform an in-depth analysis or if you should let go and move onto another stock instead.
Read: Best Free Mobile Apps for Investing
How I Perform this 10 minute Check
By utilising Investing.com Mobile App available on Android and iOS platform
First, go to Tools followed by Stock Screener
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Select Country, Exchange and Sector to narrow down selection
Add Criteria: Industry, P/E ratio
Why I chose Industry as a criteria is so that the P/E ratio selection that follows will be applicable for the selected industry. The results might be skewed if the industry is not set in place as different industries have different industry P/E ratio.
Next, select the P/E ratio option and narrow the P/E ratio range to the mid mark.
The reason for using the mid-mark as the cut off point is because generally a higher P/E ratio can indicate that the stock is being over-valued. Also, a higher P/E ratio means investors expect higher earnings and it also implies that many are chasing this stock. I personally do not like to chase the stocks that are "hot" or trendy at the moment because I see it as a "bubble" that will burst once the craze is over.
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Screener Results are presented
Once the instruments are collated for the different industries, I will input them into my template with more detailed ratios and criteria where I will perform a detailed investigation for each company.
Know of any methods other than the above? Do share with our fellow readers so we can all learn from one another! Feel free to share in the comments section.
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