You don't need a finance degree or a whole weekend to do basic research on a stock. You need a routine, so that you look at the same things every time and don't skip the uncomfortable ones. Here's one that takes about 15 minutes.
Minutes 0 to 3: what does the company actually do?
- In one sentence, how does it make money? If you can't say it, stop here and find out.
- What are its two or three biggest products or customers?
- Who are its main competitors?
The company's annual report (10-K in the US, annual information form in Canada) opens with a business description. The first page or two is enough.
Minutes 3 to 6: the numbers that matter
- Revenue: growing, flat or shrinking over the last three years?
- Profit: is it making money? Are margins getting better or worse?
- Debt: how much, compared with its cash and its profits?
- Valuation: the P/E (price compared with earnings). Compare it with the company's own history and its competitors, not with an absolute rule.
Minutes 6 to 8: what the insiders and big funds are doing
- Insider trades: any open-market purchases by executives? (Sales mean much less.) See how to read a Form 4.
- Institutional ownership: are big funds adding or trimming? Remember the data is months old. See 13F filings and short interest.
- Short interest: is a lot of the stock sold short?
Minutes 8 to 10: what analysts expect
- Earnings estimates: are they being revised up or down? The direction matters more than the number. See estimate revisions.
- Price targets and ratings: glance at them, remembering they lean optimistic. See analyst price targets.
- Next earnings date: is a report coming up soon? Moves are bigger around reports.
Minutes 10 to 12: risks and the calendar
- Any lawsuits, new share issues or big debt coming due? (Recent 8-K filings and the risk section of the annual report.)
- How much does the stock usually move? The options market's expected move is a quick guide. See what the options market says.
- Anything in the wider economy that hits this kind of business hard (rates, oil, consumer spending)?
Minutes 12 to 15: argue the other side
This is the step most people skip, and the most important one.
- Write down the three strongest reasons to own it.
- Then write down the three strongest reasons not to. If you can't think of any, you haven't looked hard enough.
- Ask: what would have to happen for this to fall 30%? How likely is that?
What to do with it
At the end you should be able to say, in a few sentences, what you think, why, and what would change your mind. Write it down. Coming back to that note later is the fastest way to learn from both the good and the bad calls.
The shortcut
Ticker Council does a version of this routine on any US or Canadian stock in a few minutes: twelve AI analysts each check one of these areas (the chart, the financials, analyst targets, earnings estimates, insider trades, Congress trades, news, SEC filings, institutional holdings, options, the economy and related markets), then a bull and a bear argue and a Challenger looks for the hole. You can see the Council's combined lean on many stocks on its public stock pages. It's a second opinion to check against your own notes, not a replacement for them.
Not financial advice: this checklist is a research routine, not a recommendation to buy or sell anything.
Questions
How do you research a stock quickly?
Follow a fixed routine: understand the business, check revenue, profit, debt and valuation, look at insider trades and analyst estimate revisions, check upcoming events and risks, then write down the strongest arguments against owning it.
What should I look at before buying a stock?
How the company makes money, whether revenue and profits are growing, how much debt it has, what it costs compared with its earnings, what insiders and analysts are doing, upcoming events like earnings, and the strongest case against it.
What is the most important step in researching a stock?
Arguing the other side. Writing down the strongest reasons not to own a stock, and what would make it fall, protects you from only seeing evidence that agrees with you.