Describe the business first
Write a short explanation of what the company sells, who pays it and how it earns money. Identify major products and markets. If the explanation depends entirely on hype or a price chart, return to the company’s own reports.
Find original information
Start with the company’s investor-relations website and its latest annual report. Read results announcements and risk disclosures. US public-company filings are available through the SEC’s EDGAR database. Check the report date and distinguish audited annual accounts from promotional presentations.
Read more than the revenue headline
Revenue is sales before costs; profit is what remains after the relevant expenses. Cash flow describes money moving in and out. Compare several periods and investigate one-off items. A company can report growing sales while losing money or needing extra funding.
Check debt and concentration
Look at borrowing, repayment dates and available cash. Ask whether the business relies heavily on one customer, product, supplier or country. These questions help explain what could go wrong; no single ratio settles the decision.
Separate a good business from a good price
A low share price does not necessarily mean a cheap company. Market capitalisation considers the total share count. Valuation ratios need context, including the sector, growth assumptions and whether profits are positive or distorted by one-off events.
Write a research note
Use these headings: business; source and date; evidence supporting the idea; risks; information still missing; and what would change your view. Include dealing fees, spreads and currency conversion in any hypothetical calculation. A checklist improves your questions but cannot guarantee a profitable investment.
Worked example: a fictional retailer
Imagine sales rise but profits fall. Before calling the share a bargain, investigate higher wage costs, discounts, new-store expenses and debt interest. Compare management’s explanation with cash flow and the notes to the accounts. Leave the conclusion open if the evidence is incomplete.
Sources and further reading
Provider settings and financial products can change. Check original sources before acting. These guides explain concepts and do not recommend individual investments.