| As noted in Part 1 of this two-part article, | | | | assets divided by shareholders equity. |
| successful online stock investing is about picking | | | | What it measures: Level of Company’s debt. |
| the best stocks to buy. Some professional | | | | Is the company submerged in debt? |
| investors and traders use the fundamental | | | | Recommended value: F/L of one means no debt. |
| analysis of stocks, other rely on technical analysis | | | | F/L less than five( 5). |
| of the financial markets. | | | | Interpretation: The higher the F/L ratio, the more |
| The fundamental analysis of stocks is based on | | | | the debt. |
| criteria like Relative price strength, Cash Flow, | | | | Observation: Avoid companies with leverage ratios |
| Financial leverage ratio, | | | | above 5 which the average of S&P500 index. |
| Consensus-earnings-forecast. | | | | P.S: Banks and other financial organizations always |
| Whether you are looking for best penny stocks | | | | carry high debt compared to firms in other |
| to buy or any other hot stocks to trade, you will | | | | industry. |
| find very useful the following 5 out 10 most | | | | 4.Consensus Earnings Forecast - CEF |
| important fundamental factors shared by the top | | | | |
| performing stocks before they made huge stock | | | | Definition: Consensus earnings forecast is the |
| market profits in short term. | | | | average of analysts’ forecasts. |
| 1.Relative Price Strength - RPS | | | | What it measures: Consensus about the earnings |
| | | | estimated by analysts. |
| Definition: Relative price strength (RPS) is the ratio | | | | Recommended value: Avoid stocks where the |
| of the price performance of a stock by the price | | | | latest fiscal-year estimates are more than two |
| performance of an appropriate index for the | | | | cents below the 90-days-ago figures. |
| same time period. | | | | Interpretation: The higher the F/L ratio, the more |
| What it measures: How stocks have performed | | | | the debt. |
| compared to the overall market over a particular | | | | Observation: CEF changes move stock prices. So |
| period. | | | | negative forecast trend warns of future forecast |
| Recommended value: Relative price strength | | | | reduction, which will likely pressure the share price. |
| (RPS) with a value of at least 70. | | | | 5.Institutional Ownership |
| Interpretation: Stocks with relative strength(RPS) | | | | Definition: Institutional ownership is the percentage |
| above 70 tend to continue to outperform other | | | | of share held by mutual funds, pension plans, |
| stocks. | | | | banks, and other big holders. Institutional |
| Observation: Avoid stocks with 12 month relative | | | | ownership for in-favor of the best stocks to buy |
| strength below 50 or stocks which three-month | | | | is usually between 30% to 60% of shares |
| relative price strength drops 20% from its | | | | outstanding, and rarely below 30%. |
| 12-month relative strength. | | | | What it measures: How many shares are owned |
| 2.Cash Flow | | | | by institution and big holders. |
| | | | Recommended value: Choose stocks with |
| Definition: Amount of money that move into or | | | | institutional ownership between 30% and 60%. |
| out of, a company’s bank accounts during the | | | | Interpretation: A stock with small % held by |
| reporting period. | | | | institutions is out of favor with investment |
| What it measures: How viable is the company in | | | | professionals. That means they don't see the |
| short-term? What is its ability to pay bills. | | | | potential of profit. Do not try to outguess the |
| Recommended value: Any positive number is OK, | | | | investment experts. |
| but it’s best if the operating cash flow (i.e.: | | | | Observation: Buy stocks with more than 30% |
| cash flow attributable to the company’s main | | | | institutional ownership. |
| business) exceeds the net income for the same | | | | These fundamentals indicators should be used in |
| period. | | | | addition to the five other metrics mentioned in |
| Interpretation: Stock of companies with more | | | | the article How to pick the best stocks to invest |
| cash flow has greater chance to rise more. | | | | in ? Part 1 of 2. |
| Observation: Stock's price of companies with little | | | | To boost your stock market results with |
| cash to support their operations is likely to | | | | high-returns picks or subscribe to Free stock picks |
| stagnate or fall. | | | | Newsletter visit Hot Canadian, European and USA |
| 3.Financial Leverage Ratio - F/L Rati | | | | Stock Market Picks , the website of the company |
| | | | co-founded by Christian Bayonne. |
| Definition: Financial leverage ratio is the total | | | | |