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Analyzing Investment Prospects

The process of analyzing investment prospects includes examining groups of investments or individual securities. For this task, you need information to forecast the timing and amount of future cash flows of investment candidates. That is, the price you pay today is based on the future income of the asset.

Figuring out what the asset will be worth in the future requires some homework, analysis, and luck. Here are a few examples of online sources for this type of information:

  • Company profiles and annual reports often forecast the company’s future revenues and earnings. Make sure you research a company in our Stock Profiles.
  • Databases (free and fee-based online sources) provide news, market commentary, historical stock prices, economic forecasts, industry standards, and competitor information.
  • Earnings estimates from brokers and analysts give you forecasts of a company’s future earnings.
  • Industry or business-sector news can frequently indicate whether an industry is in a downward cycle.
  • National economic data can point you toward a particular investment strategy. For example, if the country is going into a recession, you may want to select stocks that provide you with some defense.
  • News databases offer breaking news that can help you judge whether your stock purchase is a winner or a loser.
  • Securities and Exchange Commission (SEC) filings provide you with financial statements from publicly traded companies. These companies are required to file financial statements every 90 days and more often if big events are happening within the firm. More than 7,000 publicly traded firms are now filing online.

* View the next investment advice for building your own stock market online information system:

>> Purchasing Investments


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