First, I Don't Buy a Stock Just Because the Price Is Going Up
When I first started learning about stocks, I thought investing was very simple.
I see a company. The stock price is going up. Many people are talking about it on social media. Then I think, “Maybe I should buy this stock before it goes even higher.”
But after learning more about the stock market, I understand that it is not that simple.
A stock price can go up today and go down tomorrow. A famous company can also have financial problems. Sometimes a company is good, but its stock price is already very high.
So before buying a stock, I think we should understand the business first.
I am still learning about investing, but these are 7 simple things I check when I research a stock.
1. Revenue – Is the Company Growing?
The first thing I look at is revenue.
Revenue is the money a company gets from selling its products or services.
For example, imagine a company has:
2023 Revenue: $10 billion
2024 Revenue: $11 billion
2025 Revenue: $13 billion
The revenue is increasing every year.
This can be a good sign because the company's business is growing. But I don't want to look at only one year. I want to see the trend over several years.
I ask myself:
“Is this company really growing? And why?”
Maybe it is selling more products. Maybe it is entering new markets. Maybe more customers are using its service.
But revenue growth doesn't automatically mean the company is a good investment. A company can have very high revenue and still have low profit.
So, I continue to check other numbers.
2. Net Income – Is the Company Making Profit?
The second thing I check is net income.
In simple words, net income is the money left after the company pays its expenses, interest, taxes and other costs.
For example:
A company makes $10 billion from its business.
After paying all its expenses, it has $2 billion left.
That $2 billion is the net income in this simple example.
I also want to know if the company's profit is growing.
Imagine revenue is increasing from $10 billion to $15 billion, but profit is not increasing. That makes me want to research more.
Maybe the company's costs are increasing.
So I don't only ask:
“How much money does this company make?”
I also ask:
“How much profit does the company keep?”
3. EPS – How Much Earnings Does Each Share Have?
Another number I check is EPS, or Earnings Per Share.
At first, EPS looked a little difficult for me. But the basic idea is not too hard.
For example, a company makes $1 billion profit and has 500 million shares.
So:
EPS = $1 billion ÷ 500 million = $2
That means the earnings are $2 per share in this simple example.
If EPS is growing over time, it can be a positive sign because earnings per share are increasing.
But I don't want to look at EPS alone.
I also want to understand why EPS changed. The number of shares can change too, and that can affect EPS.
For me, the important thing is to look at the trend instead of only looking at one year's number.
4. P/E Ratio – Is the Stock Expensive?
Another popular number is the P/E ratio, which means Price-to-Earnings ratio.
For example:
Stock price = $100
EPS = $5
Then:
P/E = $100 ÷ $5 = 20
So the P/E ratio is 20.
When I first learned about P/E, I thought a low P/E automatically means the stock is cheap and good.
But it is not that simple.
A company with a low P/E can still have business problems. A company with a high P/E can have strong growth expectations from investors.
So I think P/E should be compared with:
Similar companies
The same industry
The company's historical valuation
Expected business growth
This gives a better picture than looking at P/E alone.
5. Free Cash Flow – Is the Business Generating Cash?
This was one of the more confusing things for me when I started learning.
A company can report profit, but cash flow is also very important.
Free Cash Flow, or FCF, gives investors an idea of how much cash the business has left after spending money on things needed to operate and maintain the business.
For example, imagine two companies both report $500 million in net income.
Company A has $100 million free cash flow.
Company B has $400 million free cash flow.
That doesn't automatically mean Company B is a better investment. But I would want to understand why the cash flow is different.
I think this is one of those topics that beginners should learn slowly.
6. Debt – How Much Money Does the Company Owe?
The next thing I check is debt.
Companies can borrow money to build factories, develop products, expand their business or for other reasons.
Debt itself is not always bad.
But too much debt can create problems, especially when interest costs become high or the company's business becomes weaker.
For example, if two companies have similar businesses but one company has much more debt, I want to know why.
I may also look at the Debt-to-Equity ratio and compare it with other companies in the same industry.
I learned that there is no single debt number that is perfect for every company. Different industries can have very different levels of debt.
7. Market Capitalization – Don't Look Only at the Stock Price
This is another thing that beginners can misunderstand.
A $10 stock is not automatically cheaper than a $100 stock.
Why?
Because we also need to know how many shares the company has.
The simple formula is:
Market Capitalization = Share Price × Number of Shares
For example:
Company A:
10 billion shares
Stock price = $10
Market cap = $100 billion
Company B:
100 million shares
Stock price = $100
Market cap = $10 billion
So even though Company A has a $10 stock price, its total market value is much bigger in this example.
This is why I don't want to judge a company only by looking at its share price.
My Simple Stock Research Checklist
After learning these things, I made a simple checklist for myself.
Before I seriously consider a stock, I ask:
About the business
What does this company actually do?
How does it make money?
Who are its customers?
Does the company have strong competition?
About the financials
Is revenue growing?
Is net income growing?
What is the EPS?
What is the P/E ratio?
Is the company generating cash?
How much debt does it have?
About the valuation
Is the stock price already very high?
How does its valuation compare with similar companies?
What expectations are already included in the current price?
About the risk
What could make this company perform badly?
What could happen to the business in the future?
Am I putting too much money into one company?
Don't Just Follow Social Media
One more thing I learned is that social media can be useful, but it can also be dangerous for new investors.
You may see someone saying:
“This stock will go to the moon!”
Another person may say:
“This is the next big company!”
Maybe they are right. Maybe they are wrong.
We don't know just because someone posted it online.
YouTube, TikTok, Telegram, X and other platforms can give us ideas for research. But I think we should not use them as the only reason to buy a stock.
Instead, I want to check the company's financial reports and learn about the actual business.
Final Thoughts
I am still a beginner in investing, so I don't believe there is one magic number that can tell us whether a stock is good or bad.
For me, the biggest lesson is simple:
Don't buy a stock only because the price is going up. Understand what you are buying first.
Look at revenue, profit, EPS, P/E, cash flow, debt and market capitalization.
Then look at the company's business, competition and risks.
Stock investing is not about knowing everything from the beginning. It is about learning step by step and improving the way we make decisions.
I still have a lot to learn about stocks. But now, when I see a company that looks interesting, I don't immediately ask:
“How much can this stock go up?”
Instead, I try to ask:
“What kind of business is this, how does it make money, and what am I paying for it?”
I think that is a much better place to start.
Do your own research. Learn before you invest. And never invest money that you cannot afford to lose.
This article is for educational purposes only and is not financial advice. Investing involves risk, and you can lose money.