How to Research a Company's Financial Information for Investment Decisions

The first step in selecting investments is screening for those that match your goals.

The Internet has made it very easy to find financial information and analyst reports on publicly traded companies. The Securities and Exchange Commission provides a database of all the disclosure documents submitted by public companies. Various stock research firms such as Standard & Poor's, Moody's and Morningstar as well as financial news sites like Bloomberg, The Motley Fool and Kiplinger all provide good research information. An excellent place to start your research process is your own online brokerage firm, which may provide stock screeners and analyst information. Successful investment decisions require careful consideration of as much information as you can find.

Instructions

1. Use online stock filters, found on many financial news websites and online brokerage firms, to find companies that have low debt, strong revenues and a price-earnings ratio that shows the stock to be undervalued or at least reasonably priced to the market.

2. Select stocks that match your tolerance for risk and industry interests. Go to their websites and look for the investor relations section. Read the news releases, analyst reports, quarterly reports, annual reports and other available information.

3. Search the SEC's EDGAR database (see Resources) for any disclosure documents you do not find on the company's website. There may be small differences between the SEC disclosure documents 10-Q (quarterly report) and 10-K (annual report), which is why most analysts use the SEC documents for their information.

4. Call the investor relations department at the company you are researching if you have any questions about the information you find. Although the investor relations manager can't tell you any inside information, she will direct you to any documents that answer your questions or clarify any confusing information.

5. Research past financial results for your intended investment. Reliable revenue growth is an important quality to seek, as are lawsuits, product introductions and patent infringement claims.

Tips & Warnings

• A good way to compare potential investments is to create a spreadsheet to hold the key financial ratios you use for each company you are considering for investment. Often, comparing information listed together on a spreadsheet shows important points of information you might never have considered otherwise.

• Do not harass the investor relations department. Securities law prevents the dissemination of information on a selective basis. The only information the investor relations manager can give you, legally, is what has already been made public.

References

• Investor.gov: Research Public Companies
• The Motley Fool: Financial Statement
• Kiplinger: Learning to Say Sell
• Kiplinger.com: Ten Clues to Strong Stocks
• SEC.gov: How Do I Use EDGAR?

Resources

• SEC: EDGAR Database of Online Corporate Financial Information