Evaluating securities

[Mr Nice Guy]

For those of you who invest in stocks, etfs and mutual, how do you evaluate your securities? Are there any methods you would be willing to share, other than analyzing the annual returns?

I know that ETFs have a lipper rating, and mutuals get a morningstar rating. But as for stocks, are there any ratios that you use to determine the health of a company, before investing short or long?

[dczech09]

I generally look at how leveraged a company is compared to competitors. By leverage, I mean how much debt they have proportionate to assets and equity. This should be compared with competitors only and is not good for cross-industry comparisons. For instance, banks will be MUCH more leveraged than say a restaurant chain.

A really good metric is return on equity (ROE). I also look at book-value per share compared to market-value per share; is the company trading at a price that is lower or higher than book value. Companies that trade below book value, have good earnings, good ROE, and low debt are BARGAINS! Remember, you make your money at the buy. The market will always value stocks based on fundamentals over the long run.

[Mr Nice Guy]

Just got the book Value Investing For Dummies. So if I learn anything good I will report it back here!