Identifying Growth Stocks

For successful investing it is important to look for ways of identifying growth stocks. Here are some of the things to look out for:-

Indicators of a possible share price increase…

  1. Increased Earnings
    A good track record of positive earnings is very important. Increasing earnings over time indicate a well managed company and that the company is continuing to make good progress. Remember to factor in inflation. Inflation erodes the value of money and a companies earnings need to stay ahead of it to show real progress.
  2. Increased Assets
    Look at the company’s balance sheet if debt levels stay the same but assets are rising or if assets remain stable but debts are falling the overall value of a company increases which will have a positive impact on the company share price.
  3. Insider Trading
    If the companies own directors are buying their shares this is good sign that they are ‘putting their money where their mouth is’
  4. More attention from analysts
    Positive attention from analysts can often (artificially) inflate a company’s share price. While analysts recommendations should be taken with a pinch of salt it is no bad thing if they are promoting a share you are already invested in.
  5. Takeover bids
    Rumours of takeover bids usually drive up a share price anyway but let’s face it there is usually something worth taking over or why do it. OK, I know there have recently been some bad examples of this but in general the rule hold true.
  6. Positive Consumer feedback
    High customer satisfaction should be the goal of all companies. Increased sales, increased earnings. It’s as simple as that.
  7. Demographics
    If a company targets primarily one market like teenagers then any increase in that group will have a positive impact on the company. Saga, the UK travel company that targets pensioners is doing very well at the moment. Will the eroding pensions of future generations have a negative effect?

Updated: October 14, 2011 by admin