14 August 2014


We live in an age of unbridled capitalism, corporatism and privatisation. In such a scenario, speculation has become the keyword for any organized activity, especially if it is related to something as lucrative and temperamental as the stock markets. Throughout the history of this institution, it has endowed men with alternative phases of prosperity and poverty. Whether it is the historic 1865 cotton stock prices crash in Mumbai, the 1928 crash in the U.S. market or the more recent deformations, calling the bluff of speculators has always been tuff for the common investor. Even today, there are several companies in the share market business who regularly pump in huge amount of finances in the market to better their market standing, launch fake public relations campaigns based on false propaganda and grossly overprice their stocks.
In order to take in our stride such tactics of corporate eagles, it is necessary for small time investors and stock traders to analyse the market situation in detail, with the help of tangible facts and proper professional assistance. Unlike Guajarati’s, Bohras, Khojas and Bhatiyas, other communities in our social fabric have little experience of volatile market trading and lack the societal and institutional experience of business. Hence, for them it becomes especially essential to decide on a strategy and a plan of action before taking the plunge. It is only after deciding the true value of a stock can they hope to make an informed investment decision and make hoards of profit in the long run.
How to Decide the Price of a Stock: Strategies for Rookies
There are multi typed and multi thronged strategies for deciding the real value of a stock. Though there is a bewildering multitude, the general ones enumerated in this article can be considered to be standard. First among them is the market review and the analysis of the investment destination’s market standing. While it is relatively easier to gauge the mood among the investors it can be tricky to estimate the stock offering company’s financial potential. However, investors can do so by going through the company’s proclaimed sales turnover and net profit (not gross profit). This will ensure a balanced decision on the investors’ part, except in times of sudden market breakdowns and latent but sharp market corrections. Among connoisseurs of stock market investment, this strategy is considered as the ground rule for guaranteeing financial profit in the long run.
Another supplementary strategy is to analyse the Earnings per Share ratio. The ratio is considered as one of the more reliable indicators of the financial viability of a company and can be relatively easy to internalise. Those companies who declare a high Earnings per Share ratio obviously have a sturdy functional state and are more likely to make profits than those which post low Earnings per Share ratio. However, investors might want to remind themselves that it is not a sole indicator. Only when it is supplanted with a careful consideration of other factors can it be a reflective estimate.
Also important is to understand the debt of the company offering shares. While borrowing major amounts for operational expansion is an everyday practice in the production and service industry, the recent busts have shown us that it is not always done with due diligence and foresight. Often companies take up huge loans that they find hard to repay without affecting their real profits. Hence it becomes essential for new investors to get them informed on the debt situation of the company and estimate its effects on their investment’s future. Investors also have to take into account the sales and profits. A long term analysis of both can provide valuable insights into company’s financial future and investors’ money.
How to Decide the Price of a Stock: The Encapsulation
If investors understand and materialize all these strategies into practice, no stock market deformation can lessen their profits. Following these tactics will ensure that investors make the right choice as far as stocks are concerned and ensure heavy returns in the short as well as long term. However, it is also necessary to recognize that there are still other extra official factors that operate within a market and a cautious approach is necessary in all seasons.


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