| Nine Signals of a Stock Price Increase - Presentation |
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These presentation slides explores nine signals of a stock price increase. If you find a stock that has all nine signals in this presentation, back up the truck and load up. The odds are that you won’t need all nine to indicate that it’s a stock worth a closer look. Probably five or more signals are enough to merit further consideration. In any case, the more signals, the better your chances of choosing a winning stock.
Nine Signals of A Stock Price Increase: Signal 1 : Rise in Earnings If a company earned $1 per share for the past three years and its earnings are now $1.20 per share (a 20 percent increase), consider this increase a positive harbinger. As the saying goes, "Earnings drive the market," so you need to pay attention to the company's profitability. The more a company makes, the greater the chance that its stock price will increase. Signal 9: Low P/E Relative to Industry or Market The price to earnings (P/E) ratio is a critical number for investors. Value investors in particular scrutinize it. Because the stock price's future ability to rise is ultimately tied to the company's earnings (profits), you want to know that you're not paying too much for the stock. A low P/E ratio (low relative to some standard, such as the industry's average or the average P/E for the S&P 500) is generally considered safe, and the stock is a potential bargain. If the industry's P/E ratio is 20 and you're looking at a stock that has a P/E of 15, all things being equal, that's great. The company has room for growth, and you have a good value.
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