Evaluating stock information is an important part of making wise investment decisions. When looking at stock quotes and conducting financial research on various companies, there are several things you need to look for and evaluate.
Earnings is the easiest piece of stock information to find and put a value on. If a company isn't making much money, it is not worth investing in. Any company will have some sort of investor relations information available, often on their website, that includes their annual and sometimes monthly earnings. You cannot simply go by the price of the stock, though. Stock prices, of course, are dependent on more than the company's current earnings. The price is determine more by the company's potential earnings, and therefore rises and falls based on events that are believed to affect its profitability.
The price to earnings ratio (P/E Ratio) is also a good source of stock information. This is a ratio of a company's current share price (the market value) divided by its per-share earnings. This ratio is especially useful in comparing related companies. Therefore, a company with a lower P/E is a better deal for the investor. For example, if Suntrust trades at $500 and Bank of America trades at $340, but Suntrust has a price to earnings ratio of 30 and Bank of America has a P/E of 45, then despite the higher share price, Suntrust is a cheaper investment in the long run.
The year-to-date percentage change, which is the percentage change of the stock price for the calendar year, and the 52-week high and low, which shows the highest and lowest price the stock has traded at over the last 52 weeks, are also vitally important. People know all about the “buy low, sell high” philosophy, but it causes them to make bad decisions if they don't take those two factors into consideration. For example, Company A and Company B are both trading at $10 per share. Company A has a large percentage change and 52 weeks ago was worth $325 dollars per share. Since then it has gradually dropped until it reached its current price of $10. Company B has had a lower percentage change, used to trade at $5 per share before recently improving to $10. Without taking the other information into account, you might think both stocks are equals, since they're both $10. Or you may think that Company A is a better deal because it is bound to go back to its much higher price. However, that is a stock on the decline and is at its lowest point while Company B is on the rise. Just because Company A used to be worth more doesn't mean it will again. In this case, Company B is likely the better investment. As a general rule, though you do want to buy stocks low, you would rather buy a stock on the rise than one on the decline.
When evaluating stock information, educate yourself on the company's true value, not just its price. Look at their past and future, evaluate the information in the stock quote, and make an informed decision based on that.