A share is a piece of a business, so analysing a stock means analysing the company behind it. Here’s a simple checklist.
1. The business model
How does it make money, and is that durable? Avoid what you can’t explain.
2. Profitability and growth
Is revenue growing? Is it actually profitable, and are profits rising over several years?
3. Financial health
Check debt levels — too much debt makes a company fragile in downturns.
4. Valuation
Compare basic ratios (like price-to-earnings) with peers. A good company can still be a bad buy if it’s overpriced.
5. Risks and moat
What could go wrong — competition, regulation, a single big customer? Does it have a durable advantage (a “moat”)?
Key takeaways
- A stock is a piece of a business — analyse the business.
- Favour growing, profitable companies with low debt.
- Don’t overpay — check valuation vs peers.
- Know the risks and the competitive moat.
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