Key #6: Analyst Earnings Revisions
Upward revisions are an important indicator of a company’s future success. You see, analysts are paid to estimate a company’s earnings outlook. If an analyst makes a wrong estimate that ends up costing investors money, that analyst could be out of a job. If a number of Wall Street analysts start to move their forecasts higher, it’s a good bet that the stock will outperform expectations and deliver market-beating returns to investors since positive revisions are never made lightly. Click here to see my top three stocks by earnings revisions.
Key #7: Cash Flow
Simply, cash flow is the money a company has left over after paying for the costs of its business. This is a crucial indicator of success because brisk sales and revenue don’t always add up to big profits or an ability to expand. If every cent of a company’s cash is tied up paying bills, a big sales number has a limited impact. If a company is flush with capital and on top of its game, it will deliver shareholders big profits! Click here to see my top three stocks by cash flow.
Key #8: Return on Equity
This is one of my gold standards. In simple terms, Return on Equity is the amount of profits a company generates with the money shareholders have invested. ROE tells me how efficiently a company is managing its resources. I can’t interview every senior manager at a company, so I like to think of ROE as a report card for management. To check out a company’s Return on Equity, simply take a business’s net income and divide that by the amount of money shareholders own in common stock. If a company is run well, its net income will dramatically outpace what investors have pumped into it. If a company is lazy or poorly run, the value of shares investors own will be more than the profits the company actually produces. Click here to see my top three stocks by return on equity.
Next Step: Use These Keys To Unlock Profits
By using these eight keys and 24 companies as your starting point, you can use the same tactics I do to add even more fundamentally superior companies. As you’ll soon see for yourself, this strategy pays back in spades. Now that you know these eight keys and their corresponding stock picks, you can go out and invest with confidence in this market!