What are the criterias to be seen before investing ain a company?

[Mystery]

i ama a university studenst aand i have a project where we have to analyze ourselves as an investor or a shareholder
What are the things i should see before investing in a company??
Pls help asap
thanks in advance

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[Fundu Vishy]

A question which most experts in the market are still answering.

In my view, investment in a company is like investment in business, which someone else is going to run.

What are the things that I will look for in investment in business in light of the above? My answer would be;

1. Business of the Company & the Industry

a. The business model of the company: Is the company having a business model, which enables them to create value for its customers and thus earn revenues.

b. The industry that the company is involved in and the trends that are expected in the industry.

c. Other major competitors and evolving trends in the industry that will have a bearing on the Company's products and services and thus its financial performance

d. Market potential and socio - economic factors that would impact the business of the Company

2. Management

After understanding the business of the company as above, I would like to look at the management and its ability to run such a business including the experience they have and more importantly the passion they have for the business

3. Valuation

Price is an important factor to be considered while investing. A outstanding company with a great management team if over priced will not be worth looking at. Hence, I will look for the valuation of the company and its attractiveness at the said valuation. This valuation has to provide me with an opportunity of earning higher in the coming days and hence, should not be over valued.

There are many measurements available including PE Ratio, Price to Book Value, Discounted cash flow, comparison with benchmarks & other market players etc.

4. Market conditions for the Company in specific and the market in general

One more area, which is of importance is the liquidity that the stock has in the market. it would be difficult to both buy and sell illiquid stocks, irrespective of compelling business, management and valuation. Hence, this is one of the factor which will weigh in my mind before i select a stock.

On the general market conditions, while may not have a long term impact on the market performance of the company, it will give necessary inputs on other companies in similar business / industry as well as the overall scentiments in such stocks. I will take this in to consideration even though, this may not be having a major bearing on the decision making.

I believe that if I see all the above carefully before investing, the process will enable me to be a very successful investor

trust this is useful. All the very best

--
Fundu Vishy - Your 'Mutual' Friend
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I blog @ http://blog.powermf.com