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During the analysis of a stock, you analyze a few technical, fundamentals as well as environmental points. For example the PE, or Volume, etc. for technical points and News and rumors for environmental points.

Then you have your personal beliefs. Principles, Ethics of the company and so on.

When looking at the indicators only. What makes a stock an ideal buy or sell?

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    When the monkey hits its stock symbol on a dartboard, but then that is just my opinion of technical analysis of stocks. – JohnFx Feb 4 '12 at 20:06
  • +1 for the Monkey comment. I think the same way when it comes to technical analysis, therefore the question. – Geo Feb 5 '12 at 0:43
  • Technical analysis is the study of a stocks chart (price and volume) with or without various indicators, whilst fundamental analysis is the study of the company's performance by looking at its results through various ratios like P/E etc. – Victor Feb 5 '12 at 7:22
  • @Victor Thanks for the correction. If that is the case, then my question is incorrect. I am trying to understand the fundamental analysis that will make a stock to be an ideal buy or sell. – Geo Feb 5 '12 at 23:19
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for buying: High PE, low debt, discount = win.

a company with high debt (in relation to revenues and cash on hand) will have to pay interest and pay off the debt, stunting their growth. and just like a normal person, will barely be able to pay their bills and keep borrowing and might go bankrupt

determining discount is just looking for a technical retracement to a support level or lower. (but if you dont enter at the support level, you most likely missed the best entry)

  • When all is said and done, investing in a company is all about the earnings, and what price you pay to get them. Those two measures are your return. Any other indicator is just something that will help you figure out how where those earnings are going to go in the future... – fennec Feb 26 '12 at 17:29
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I look at the following ratios and how these ratios developed over time, for instance how did valuation come down in a recession, what was the trough multiple during the Lehman crisis in 2008, how did a recession or good economy affect profitability of the company.

Valuation metrics:

Enterprise value / EBIT (EBIT = operating income) Enterprise value / sales (for fast growing companies as their operating profit is expected to be realized later in time) and P/E

Profitability:

Operating margin, which is EBIT / sales Cashflow / sales

Business model stability and news flow

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