Understanding the market value of a company helps to form a basic understanding of listed companies. The size of the company's market value can reflect the volatility and liquidity of the company's shares, the range of shareholders of the company, and the potential market value of the company. For example, listed companies with a market value of more than 100 billion usually have relatively stable profits, while small and medium-sized enterprises with a small market value are prone to great changes in their profits and share prices.

This step is mainly to obtain basic information for further analysis. When you start to look at the company's income and profit data, the market value will help you gain a deeper understanding.

2. Understand the company's income, profit and profit rate.

When paying attention to the financial data of listed companies, it will be a good choice to start with the three data of income, profit and profit rate. Check the income and net profit of the past two years, including quarterly, semi-annual and annual data; Then according to the calculation, the marketing rate or price-earnings ratio is obtained. Through the changes of these data, we can judge whether the company's growth in the past has been sustained or whether it has experienced significant fluctuations in the past two years (for example, more than 50% in one year).

As for the change of profit rate, we should pay attention to its changing trend, whether it is down, up or basically unchanged, and the logic behind these changes.

3. Competitors and industries

By comparing the profit margins of several representative companies in the same industry, we can have a judgment on the profit level of the company in the industry. It is best to refine this horizontal comparison to every specific business, so as to have a clearer understanding of the main business and management level of listed companies.

Information about competitors can be easily obtained from the company's regular reports, related research and numerous financial securities websites. If there is still uncertainty about the company's business model, you need to spend more energy and time here. You can also help you define your target main business by knowing the situation of other competitors.

4. Valuation multiple

Now we should pay attention to the PE and PEG multiples of the target company and its main competitors, and record all the big differences for further comparison. PE multiple can give us a preliminary company valuation. Valuation based on historical profit level or current expected profit can be a good benchmark to compare with the P/E ratio of the whole market and competitors.

A basic difference between growth stocks and value stocks lies in the difference in the market's profit expectations. When considering the profit expectation, it is best to review the historical data of the past few years. From the changes of these data, we can observe whether the current expected data is within a reasonable growth range. If the profit expectation is suddenly raised, we need to delve into the logic and supporting reasons behind it.

5. Management and equity

The age of a company is also an important factor. Professional managers may be the majority in the management of companies with a long history, while more people in the management of emerging companies are from founders. By reading the resumes of the executives of these companies, we can understand their personal experience, so that we can have a clearer understanding of the management and operation of the company. At the same time, it is also necessary to know whether the founders and executives hold more shares in the company, as well as the institutional shareholding.

6. Balance sheet

To read the consolidated balance sheet, we should first understand the company's total assets and liabilities, and pay special attention to the company's cash position (in order to understand the company's short-term solvency) and the company's long-term liabilities. A large amount of debt is not necessarily a bad thing. The financial structure of a company depends more on the needs of business structure and business model.

Some companies and industries are typically capital-intensive, while others need more manpower, equipment and innovation. The company's debt-to-equity ratio is also an important indicator, from which we can understand the company's debt and equity ratio structure. Finally, these financial indicators of the company are compared with competitors, so as to gain a more intuitive understanding.

7. History of stock price changes

At this point, you need to pay attention to the past trading history of stocks, including short-term and long-term price changes and stock price fluctuations. These actually reflect the profit experience of the holders of this stock in the past, and will have a certain impact on the future stock price trend. For example, stocks with large historical stock price fluctuations tend to attract short-term investors, while for other investors, such stocks mean extra risks.

8. Understand the circulation of restricted shares of the company.

As a legacy of the share reform, the restricted shareholders of listed companies played an unpopular role in the market in 2008. No matter how much impact these non-small shares have on the market, or whether they are willing to reduce their holdings, they have become a problem that individual investors must face up to now.